In this piece, we will take a look at the 10 best consumer staples stocks to buy now.
Consumer staples stocks are for the risk averse investor and for those who like to hedge their investment portfolios. Also known as consumer defensive stocks, these are often sizeable firms that operate in industries that see stable demand during economic downturns. Some such sectors include essential retailers and pharmaceuticals, since while an economic slowdown decimates demand for pricey products such as GPUs, food and daily essentials survive simply because consumers can’t live without them.
At the same time, not only do consumer staples stocks allow investors to ride out the storm in a dark economy, but they also provide them the chance to either grow their portfolio or earn a stable income in the form of dividends. Insider Monkey looked at consumer staples stocks that pay dividends as part of our coverage of 13 Best Consumer Staples Dividend Stocks To Buy Now. In this list, the stock with the highest dividend yield had a yield of a stunning 9.69% which came on the back of a stunning 54 years of consistent dividend growth.
Like their counterparts in the consumer cyclical stock category, consumer staples stocks are also dependent for the most part on the economy. These are sizeable and stable firms that pay impressive dividends as we’ve highlighted above. However, like all other stocks, consumer staples are also dependent on the business cycle. The business or the economic cycle is divided into four phases. These are the early phase, the mid phase, the late phase, and the recessionary phase. For staples, the late and recessionary phases are the best when it comes to returns. Even though the market has produced 20% in average returns per year in the early phase since 1962, consumer staples have consistently produced the strongest returns in the recessionary phase and remain in the green during the late phase.
Analyzing data for business cycles since 1962 shows that the average returns of consumer staples stocks during the recessionary and late phases sit at ~14% and 5%, respectively. Since averages are influenced by outliers, we can also subtract the market’s performance from staples stocks’ performance and take the midpoint of the results. Doing this reveals that while during the late stage, the returns become negligible (but not negative), in a recession, they actually gain a percentage point or so to sit at 15%! Not only does this indicate that staples broadly outperform the market in a recession, but a hit rate (the percentage of time periods in the business cycle periods in different cycles over time where the sector outperformed) of 100% indicates that the performance is consistent across all business cycles since 1962.
Since there’s a stark difference in the returns offered by consumer staples stocks during different periods of a business cycle, it becomes important to try to decipher which phase we’re in right now. Determining this is no easy task, and we can use two approaches. The first of these is to see what the professionals are saying. On this front, research from investment bank Morgan Stanley shares some details. It shows that the economy has been in a downturn since last year, which is synonymous with the mid of a late stage cycle or the start of a recession. We can also read economic indicators and try to match them with what is typically observed during a stage of the economic cycle. Analyzing three data points, namely the GDP growth rate, inflation, and retail inventories shows that GDP growth slowed down to 1.4% in Q1 2024 from a far more robust 3.4% in Q4 2023; inflation in April was 2.6% for the PCE in May 2024 and still higher than the Fed’s preferred 2%, and retail inventories jumped by 1% annually in February. These three metrics indicate that we might be in the late stage of the business cycle which comes before a recession.
Shifting gears, it’s also important to see which sectors within consumer staples stock can benefit from consumer spending during an economic downturn. According to the Labor Department, the relative importance of food at home and used cars grows during a recession. These sat at 8.64 and 1.91 for data collected between 2009 and 2010, and grew from 7.66 for food and 1.77 for cars in the boom period represented by data collected between 2005 and 2006. As an exercise, you can scan our list for which stocks might benefit from an uptick in spending for these products.
While consumer staples stocks can be worthwhile investments, their share price gains tend to be more muted compared to high-growth sectors like consumer technology or electric vehicles. This is because their underlying fundamentals and business models are not typically focused on rapid expansion. For instance, one of the most popular consumer staples stock indexes maintained by the S&P is up a respectable 8% year to date and 7.55% over the past twelve months. On the flip side, the benchmark index is up by 26% over the past twelve months, while the technology heavy stock indexes have delivered as much as 31% in appreciation.
At the same time, consumer staples stocks might also be the perfect place for investors to take refuge in the current stock market environment. The S&P benchmark index’s price to earnings ratio is 21, which is near historically high levels. Data from investment bank Goldman Sachs shows that a P/E ratio of 20 places it in the 85th percentile of the index’s ratios since 1990. Overvaluation concerns for the benchmark persisted in June 2024, with the latest survey from Bloomberg News showing that the majority of the 586 market participants surveyed believed that the market was more overvalued than cash and US credit.
Keeping up with the cautious sentiment, roughly half of the participants polled also believe that the market can undergo a correction of as much as 10% this year, and 31% of the participants surveyed also believe that negative news on the AI front could lead to a selloff, with 27% holding the opinion that stocks could fall if unemployment continues to increase. Within this turmoil, one of the few sectors that Goldman Sachs believes might offer investors some stability is consumer staples as they have lagged the broader market in performance (a fact that we also noted above in the form of a 23 percentage point difference between the consumer staples and the benchmark stock indexes).
With these details in mind, let’s take a look at some top consumer staples stocks to buy. Smart money often thinks ahead, so it might be worth seeing how the hedge funds are investing as investors brace for economic impact. If you’re interested in learning more about consumer staples, then you should read Top 20 Largest Consumer Staples Companies in the World.
Our Methodology
To make our list of the best consumer staples stocks to buy, we ranked the 40 most valuable consumer staples stocks by the number of hedge funds that had bought the shares in Q1 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Investors In Q1 2024: 50
Colgate-Palmolive Company (NYSE:CL) is a well known personal grooming and care brand. The firm benefits from its sizeable market share and financial strengths, which provide it with ample room to not only grow its sales but also hedge against any economic weakness. As of December 2023, Colgate-Palmolive Company (NYSE:CL) had cash and equivalents of $966 million coupled with sizeable goodwill and intangible assets of a whopping $5.2 billion. The latter showcases its brand strengths, which is further bolstered by the fact that it commanded nearly 41% of the global toothpaste market as of June 2023. Colgate-Palmolive Company (NYSE:CL) is also well known in the industry for its efficient cost management. The firm’s trailing twelve month revenue of $19.7 billion and gross profit of $11.6 billion lend it a gross margin of 58%, which shows that Colgate-Palmolive Company (NYSE:CL) benefits by being nimble. This is because the firm’s larger rival Procter & Gamble has a gross margin of 51% – indicating that not only does Colgate-Palmolive Company (NYSE:CL) can ensure stability through its high market share but it is also taking cost control seriously.
As for future growth, Deutsche Bank raised Colgate-Palmolive Company (NYSE:CL)’s share price target to $98 from $94 in April 2024 and kept a Buy rating on the shares. The bank highlighted that Q2 should see further growth from the firm, before the benefit of pricing strategies starts to ebb away in the second half of the year. Colgate-Palmolive Company (NYSE:CL)’s management also shared details about how the firm is managing margins in a tough foreign exchange environment dominated by a strong US dollar. During the latest earnings call, it shared:
We still have work to do, but our balanced strategy continues to yield results, including continued growth in our global oral care shares, which leads me to my second point, which is flexibility in the P&L. Our focus on revenue growth management and driving our Funding the Growth initiatives enabled us to achieve a 60% gross margin in the quarter, despite significant headwinds from transactional foreign exchange. Our commitment to productivity in the middle of the P&L allowed us to drive 30 basis points of overhead leverage while still continuing to invest in strategic capabilities like digital, data and analytics, all topics we discussed at CAGNY. Prudent balance sheet management allowed us to deliver 18% base business earnings growth despite the year-over-year increase in interest expense and the impact from devaluations around the globe.
Most importantly, despite an expected mid-single digit negative impact from foreign exchange, we’re guiding to mid to high single digit base business earnings per share growth, and we’re doing this in the context of meaningful increases in brand investments that will set the stage for growth in the future. This is a testament to the ability of our team to consistently execute our strategy and seize growth opportunities while also preparing to better withstand the inevitable headwinds of running a global business.
9. The Estée Lauder Companies Inc. (NYSE:EL)
Number of Hedge Fund Investors In Q1 2024: 51
The Estée Lauder Companies Inc. (NYSE:EL) is one of the biggest make up companies in the world. However, its heft has failed to stop disappointing financial performance which has also translated into weaker share price performance. The firm’s third quarter results released in May 2024 saw it grow revenue by 5% annually to $3.94 billion – the first growth since 2022. A high focus on luxury items has hurt The Estée Lauder Companies Inc. (NYSE:EL) in an inflationary era, with a 1% sales growth in the Americas providing it with a small respite. Since roughly 40% of The Estée Lauder Companies Inc. (NYSE:EL)’s sales are from China and travel, the prolonged slowdown in the country has hampered investor sentiment in the firm. The stock is down by a painful 40% over the past twelve months, and the latest results also saw The Estée Lauder Companies Inc. (NYSE:EL) increase its guided organic sales drop in 2024 to 1% to 2% from an earlier 1% drop to a 1% growth.
Due to its big bets on China and a focus on high end luxury, any turnaround in The Estée Lauder Companies Inc. (NYSE:EL)’s fate is dependent on improved consumer spending power and a Chinese recovery. On this front, here’s what management had to say during the latest earnings call:
For Mainland China, we returned to organic sales growth, albeit at a slower pace than expected amid an overall soft prestige beauty industry. Retail sales for prestige beauty were strong in January but moderated in February and March, due in part to the Chinese New Year considering the Valentine Day this year which limited gifts. This certainly impacted the industry but also many of our brands which have a strong presence in gifting. Our focus remains bringing irresistible newness to consumers to best create growth opportunities. Here our innovation in Estée Lauder Nutriv and Supreme franchise as well as a La Mer and M·A·C were well received across the third quarter and we have more compelling launches in the fourth quarter. One in particular from Estée Lauder Perfectionist Pro franchise is especially exciting as it is among the first product created in our China innovation labs and addresses local demand for SPF 50 plus UV protection that is suitable for sensitive and post derm procedures of the skin.
. . . In Mainland China, we expect the ongoing softness of overall prestige beauty to continue to pressure net sales. Currency translation is expected to be dilutive to reported net sales by one point. We expect fourth quarter adjusted EPS of $0.18 to $0.28, an increase of over 100%. Currency translation is expected to dilute EPS by $0.01 and potential risks of business disruptions in the Middle East are expected to be dilutive by $0.03. Adjusted EPS in constant currency is expected to range between $0.19 to $0.29. For the full year, we expect organic net sales to range between a 1% to 2% decline. Currency translation is expected to be dilutive to reported net sales by one point.
8. Mondelez International, Inc. (NASDAQ:MDLZ)
Number of Hedge Fund Investors In Q1 2024: 62
Mondelez International, Inc. (NASDAQ:MDLZ) is a confectionery company known for some of the best known brands in the world such as Oreo and Dairy Milk. However, while its products are not high end (like Estee Launder’s), the firm is facing similar troubles from inflation despite its heft. Mondelez International, Inc. (NASDAQ:MDLZ)’s problems are further complicated by the fact that a large portion of its products are dependent on cocoa. Cocoa prices crossed $10,000 per ton in March 2024, and while it did not directly impact Mondelez International, Inc. (NASDAQ:MDLZ) due to hedging, the trends have created worries about the future. Additionally, the firm is also battling the impact of high inflation on its consumers, and to offset high costs, it has had to raise prices right when consumers are also feeling the inflationary pinch.
Mondelez International, Inc. (NASDAQ:MDLZ)’s first quarter earnings were all about cocoa too, with management explaining in detail its plans to not only deal with the changes but also its belief that they are ‘transitory.’ What this means is that the full impact might not pass on to customers, and while this could bode well for Mondelez International, Inc. (NASDAQ:MDLZ)’s market share, it might eat into its margins as a result and depress earnings. One relevant snippet from the earnings call is as follows:
Yes. I believe it’s absolutely critical for us to get ready for potentially cocoa staying at these levels. I just want though to call out one thing, which is, the forward curve for cocoa is heavily inverted. And that means in general that even today we could potentially get physical coverage into 2025 at cheaper prices than the current spot price that we see today. But rest assured that as a Company, we are looking at all possible scenarios. And as a matter of fact, we are taking a fresher look at some of the costs we have, making sure that we try to understand the level of flexibility that we have. We are looking thoroughly into additional RGM. We will stay absolutely true to the concept of protecting price point, particularly in emerging markets.
We are not going to move the LUP, low unit price points in India, for instance. But we will be looking into potential RGM in terms of promo, in terms of downsizing, etc. So to say that we will have to make sure that elasticity stays in control. In the end, we are going to be managing 2025 in light of what we think a more plausible cocoa level is, despite the fact that it might feel very high, because we fundamentally believe that in a couple of years’ time tops, the cocoa price will correct. And at that point in time, we will have to have retained our volume, our share, our competitive advantage both in developed and in emerging markets. And that’s the way we are looking at this. But rest assured, we are looking at all possible scenarios. And we’re going to be sitting down soon with the teams to make sure that we put in place already all the possible actions that would allow us to go through a potential worst-case scenario in 2025.
7. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Investors In Q1 2024: 62
The Coca-Cola Company (NYSE:KO) sells carbonated beverages and other consumables. The fact that it’s one of the two major global carbonated beverages brands means that The Coca-Cola Company (NYSE:KO) is quite stable in terms of its future outlook. However, investors are always yearning for growth, and the firm has to deliver in this area to sustain its market advantage and a 3% dividend yield. On this front, while The Coca-Cola Company (NYSE:KO) has to maintain its presence in the developed world, equally, if not more importantly, its growth in the developing world and Latin America is key. This has to be accompanied by new products as well to allow The Coca-Cola Company (NYSE:KO) to ensure that its brand does not become stale with age. In short, the firm needs to sustain its developed market presence, it has to continue to innovate by launching new products and ensure that it establishes a strong foothold in the developing world.
The Coca-Cola Company (NYSE:KO)’s Q1 2024 earnings call saw management share information on all these fronts. They outlined that “about 25% of the growth comes from innovation,” and also shared struggles in the developing world with high inflation and a stronger US dollar:
However, across developing emerging markets there continues to be a handful of markets that are experiencing intense inflation which is driving elevated pricing offset by incremental currency headwinds. We’re proactively managing these volatile environments and we feel confident we have the playbook to navigate challenges locally while continuing our momentum at a consolidated level.
6. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Investors In Q1 2024: 62
PepsiCo, Inc. (NASDAQ:PEP) is also a dominant force in the global carbonated beverages market. Since both PepsiCo, Inc. (NASDAQ:PEP) and Coca-Cola operate in the same industry, their performance is also dependent on similar trends. PepsiCo, Inc. (NASDAQ:PEP) and Coca-Cola tend to do well during periods of moderate inflation as they can grow revenue by increasing prices and maintaining tight cost control to ensure that the percentage of price increases is higher than the internal cost increases. At the same time, PepsiCo, Inc. (NASDAQ:PEP) also has to ensure that a slew of new products help it maintain market share in the developed world, and gain market share in the competitive and untapped developing world. PepsiCo, Inc. (NASDAQ:PEP) shares have lost roughly 3% year to date as investors believe that since inflation has started to drop, it can not aggressively grow its revenue by increasing prices.
During its Q1 2024 earnings call, PepsiCo, Inc. (NASDAQ:PEP)’s management commented on its hopes for the developing world and how success in the developed world might translate into success in the region:
I think our team in Europe is doing a fantastic work. It started with strong productivity, simplifying the business and driving cost control, eliminating duplication and then reinvesting that money back into our brands and becoming more competitive and also driving our availability and driving our brand preference. And that is a flywheel that is working for us across both developing and developed markets in Europe. Obviously, developing markets a bit more. So if you think about Eastern Europe markets are growing a little bit faster than Western Europe markets. Western Europe markets have been impacted a little bit in this first quarter by some of the negotiations, and that’s not atypical in Europe.
But I think we have a good flywheel in Europe, and Europe will be expanding its portfolio along the lines of what the US has been doing, which will give us additional consumers and additional penetration in households across developed and developing markets. So we feel good about the flywheel in Europe. But at the center of that is a very strong productivity, cost discipline and reinvestment strategy that is, in a way, what we’re trying to do across the full company, elevating our productivity and driving their investments both into affordability, availability, a better brand equity and then investing back into our future, digitalization and sustainability at the center of that investment. So it’s a flywheel that we’re trying to do for all the world.
5. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Investors In Q1 2024: 64
Philip Morris International Inc. (NYSE:PM) is a major player in the tobacco industry. This means that the firm is under a lot of pressure to innovate, despite the fact that it commands a 23% share of the global tobacco market. Philip Morris International Inc. (NYSE:PM)’s products are facing a lot of heat because of health risks and from the stunning rise of smoke free tobacco products such as vapes and heated tobacco. As a result, a lot of investor expectations for Philip Morris International Inc. (NYSE:PM) deal with the performance of its heated tobacco business division and its iQOS eCigarette. Like Pepsi and Colgate, a stronger US dollar also harms Philip Morris International Inc. (NYSE:PM) as the firm earns fewer dollars for every unit of products priced in foreign currency that it sells. Therefore, the outlook is clouded for Philip Morris International Inc. (NYSE:PM) as long as the dollar remains strong and it struggles to extract value from non dollar denominated sales. Additionally, the relatively nascent nature of the eCigarette market means that this industry is vulnerable to new regulations and taxes that could dampen growth for iQOS and similar products.
Philip Morris International Inc. (NYSE:PM)’s management commented on these trends during the firm’s Q1 2024 earnings call. Here is what they said:
Our excellent IQOS and ZYN volume momentum, best-in-class pricing, positive category mix and stepped-up cost efficiencies put us on track for a strong 2024, with accelerated top-line growth and margin expansion. Following an exceptional and better-than-expected start to the year, we have raised our full year currency-neutral growth forecasts. Critically, we are also focused on delivering performance in dollars. We are taking measures to mitigate currency headwinds through pricing, accelerated manufacturing productivities and judicious resource allocation to prioritize growth investments. Our 2024 outlook places us firmly on track to deliver our 2024-2026 CAGR targets.
Beyond 2026, we have further exciting opportunities to grow our smoke-free business as we progress towards our ambition of being substantially smoke-free by 2030. Finally and importantly, our strong growth outlook and highly cash generative business underpins our ability to deleverage while maintaining a steadfast commitment to our progressive dividend policy. We look forward to further rewarding our shareholders as our transformation delivers sustainable growth. Thank you and we are now very happy to answer your questions.
4. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Investors In Q1 2024: 65
Costco Wholesale Corporation (NASDAQ:COST) is one of the biggest discount retailers in America. It is a well established business with a sizeable presence in the market. Unlike other retailers, Costco Wholesale Corporation (NASDAQ:COST)’s loyalty programs that not only provide discounts for products sold in its stores but also other services means that the firm has a robust and loyal customer base. This entrenched loyalty is quite important in today’s retail industry, particularly when we analyze the rise of PDD Holding’s Pinduoduo in China which has grown and prospered despite a slow economy due to a unique customer loyalty proposition that offers them a chance to bargain in numbers. Why is it important? Well, should Costco Wholesale Corporation (NASDAQ:COST) pursue similar loyalty initiatives in China and other countries, then it could rapidly grow its global market share as well.
Costco Wholesale Corporation (NASDAQ:COST)’s quarterly results in May also saw it report a 7% revenue growth for the first 39 weeks of the year to $186 billion. This growth came as inflation continued to remain a problem for consumers, and it highlighted the strong performance of the firm’s business model. However, during the call, the management shared details about a mixed margin performance, as while some margins grew, others dropped:
Core was flat and higher by 2 basis points without gas inflation. In terms of core margin on their own sales, our core-on-core margins were higher by 10 basis points. Ancillary and other businesses gross margin was lower 6 basis points and lower 5 basis points excluding gas inflation. This decrease year-over-year was driven by gas, partially offset by e-commerce. 2% reward was lower by 1 basis point, both with and without gas inflation with higher sales penetration coming from our executive members. LIFO was a benefit of 2 basis points. We had an $11 million LIFO credit in Q3 this year compared to no LIFO charge or credit in Q3 last year. This is the third LIFO credit this year following a $15 million LIFO credit in Q1 and a $14 million credit in Q2.
And finally, other was higher 57 basis points or 56 basis points excluding gas inflation. This was all related to lapping last year’s negative impact from the $298 million pre-tax charge for charter shipping activities. Moving on to SG&A. Our reported SG&A rate in the third quarter was lower or better year-over-year by 15 basis points, coming in this year at 8.96% compared to last year’s 9.11%. SG&A was lower year-over-year by 12 basis points adjusted for gas inflation. The operations components of SG&A was lower by 14 basis points and lower by 12 basis points, excluding the impact from gas inflation, despite an increase in warehouse wages this year. Higher labor productivity and great cost discipline by our operators drove the improved core SG&A results for the quarter.
3. Target Corporation (NYSE:TGT)
Number of Hedge Fund Investors In Q1 2024: 67
Target Corporation (NYSE:TGT) is another discount retailer. It has close to two thousand stores in the US, which makes it one of the largest retailers of its kind. This means that the firm’s share price performance is dependent on three primary metrics. These are Target Corporation (NYSE:TGT)’s retail footprint, its revenue growth, and its margins. The firm has to deliver consistently on all three to ensure sustained bullishness in its shares. Additionally, while Target Corporation (NYSE:TGT) is a defensive stock because of its business model, its revenue is also dependent on discretionary spending. This leaves the stock vulnerable to inflationary and purchasing power trends, as while it can still bring in money during a slowdown, sales can drop as well.
Target Corporation (NYSE:TGT)’s first quarter earnings reflected this headwind, as management shared during the call:
And even as inflation moderates and we see sequential improvement in discretionary category trends, higher interest rates, uncertainty around the future of the economy, continued social and political divisiveness, and the upcoming election cycles have consumers concerned about what lies ahead. In fact, consumer confidence took a meaningful dip in April despite a strong job market and normalizing inflation. And beyond the psychological toll of the current environment, the sustained level of elevated prices has had a meaningful impact on budgets and savings for many families. Currently, one in three Americans has maxed out, or is nearing the limit on at least one of their credit cards. For these reasons and more, we remain cautious in our near term growth outlook.
Notably, we expect discretionary trends will continue to remain pressured in the short term, but to normalize over time.
2. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Investors In Q1 2024: 69
The Procter & Gamble Company (NYSE:PG) is one of the biggest consumer goods companies in the world. This allows it to hold a dominant market position in several markets such as razor blades. The Procter & Gamble Company (NYSE:PG) is further helped by its vast brand portfolio, which is made up of nearly 80 different brands such as Gillette and Oral-B. These, coupled with a robust balance sheet made of $8.2 billion in cash and a stunning $62 billion in goodwill set up The Procter & Gamble Company (NYSE:PG) well to weather any major economic storm or downturn. At the same time, the heft also means that the firm has to keep matching investor growth expectations and maintain its volumes. Recent inflationary trends have presented it with ample opportunity to grow revenue by increasing prices. The Procter & Gamble Company (NYSE:PG)’s $82 billion in sales during fiscal 2023 marked a 15.6% growth 2020’s figures and helped set investor expectations. The firm is also well hedged against slowdown in China, as, unlike Estee Launder, China does not account for high double digit percentage of its sales. During the latest quarter, 9% of The Procter & Gamble Company (NYSE:PG)’s sales came from China, which limited the effect of a 10% drop in Chinese sales.
At the same time, since inflation is dropping, worries persist about The Procter & Gamble Company (NYSE:PG) being unable to maintain this growth trend. Additionally, higher prices mean less volume, and this was also the case during its Q3 fiscal 2024 earnings which saw volumes stay flat for the second consecutive quarter. During the accompanying earnings call, management shifted the talk to the firm’s Focus markets:
Focus markets grew organic sales 2% for the quarter, and Enterprise Markets grew 4%. Organic sales in North America grew 3% with 3 points of volume growth. Over the last 4 quarters, volume growth in North America has been plus 2%, plus 3%, plus 4%, and now plus 3%. These results include over a point of impact from retail inventory reductions, primarily in personal healthcare. Consumer demand for P&G brands remains very strong in the U.S., with all outlet consumption value growth of 5%, all outlet value share was up 10 basis points versus prior year. U.S. volume share was up 40 basis points, reflecting continued strong volume growth ahead of the underlying market. The gap between consumer offtake of 5% compared to our U.S. sales growth of 3% reflects the aforementioned trade inventory reductions in the quarter.
Europe focus markets were up 7% with 4 points of volume growth.
1. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Investors In Q1 2024: 88
Walmart Inc. (NYSE:WMT) is the world’s largest brick and mortar retailer – a fact that provides it with its own set of advantages and disadvantages. The advantages see Walmart Inc. (NYSE:WMT) benefit from a sizeable market that it has to maintain in order to keep up sales volume. However, at the same time, the retail industry is one of the most dynamic in the world because of the growth in eCommerce. Established firms like Walmart Inc. (NYSE:WMT) can see their business disrupted should online retailers capture a greater share of their market. However, the firm has been using its considerable resources ($9.8 billion in cash) to grow its presence in eCommerce, automation, marketplaces, and advertising. These businesses come with the chance of improving Walmart Inc. (NYSE:WMT)’s margins – which are notoriously low in retail. industry. At the same time, while the stock’s future will be judged on the strenght of these initiatives, at its heart, Walmart Inc. (NYSE:WMT) is still a traditional retailer. This means that sales volumes, price increases, and inflation all play a key role in determining its financial health.
During Walmart Inc. (NYSE:WMT)’s first quarter earnings conference, management commented on its new initiatives. It shared:
And I think I’d first start with eCommerce. The strong performance at 22% growth is very helpful. We’ve picked up momentum in the marketplace. Really, really pleased to see a number — a really large number of new sellers come on board, and assortment’s well north of $400 million. We spent a lot of time talking about our customer experience score, which starts with the top of the funnel, and then we work our way all the way down the conversion. And as John David mentioned earlier, one of the components is perfect order. And as you look through results, it’s exciting to see more customers shopping more often, particularly in the marketplace. And then the categories that are really strong that are standing out is apparel and fashion online.
I’m really excited about what’s happening in men’s and women’s and kids apparel, we’ve seen growth there. And then our hardlines business has been strong over the quarter. It was helpful in the quarter to have Easter early and strong weather in March that give us a strong early start. And these businesses we call omni services like tire installation, as we mentioned earlier, having your prescription ready by ordering online or cake decorating, these are all great services that are relatively unique to Walmart to be able to enable those from a digital standpoint all the way through the store and then deliver to people’s home. So I really am excited about the convenience and the expansion and assortment that we’re offering.
While WMT sits at the top of the consumer staples stock pyramid, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None.
