What’s hurting the consumer staples industry?
So far, 2018 has been a difficult year for the consumer staples industry—even tougher than last year. The US tax reforms provided a much-needed cushion for consumer staples companies, allowing them to focus on innovation and pursue growth measures. However, softening demand, price competition, macroeconomic challenges in certain markets, a strong US dollar, and continued inflation in input and transportation costs have added to their woes.
The Consumer Staples Select Sector SPDR ETF (XLP), which is seen as the barometer for the industry, underperformed the broader markets as the majority of packaged food and tobacco stocks remained a drag, with double-digit falls in their stock prices.
XLP is down ~1.6% YTD (year-to-date) as of November 19. In comparison, the Technology Select Sector SPDR ETF (XLK), the SPDR S&P Retail ETF (XRT), and the Consumer Discretionary Select Sector SPDR ETF (XLY) have risen 2.6%, 0.7%, and 5.1%, respectively, YTD. Meanwhile, the S&P 500 Index is up ~1% YTD.
Five stocks bucking the sluggish industry trend
XLP, which lagged the broader markets significantly in the first half of 2018, has marked a healthy recovery so far in the second half of 2018 thanks to companies such as McCormick (MKC), Church & Dwight (CHD), Hormel Foods (HRL), Costco (COST), and Archer Daniels Midland Company (ADM), which are bucking the industry trend and have outperformed the broader markets with their stellar returns. MKC, CHD, HRL, COST, and ADM are up 46.4%, 29.2%, 24.6%, 22.9%, and 15.5%, respectively, YTD.
The recent recovery in the stock prices of the Clorox Company (CLX), Procter & Gamble (PG), the Coca-Cola Company (KO), Walmart (WMT), Walgreens Boots Alliance (WBA), the Hershey Company (HSY), and Kroger (KR) further contributed to XLP’s rise.