Jim Cramer, host of Mad Money, recently took a close look at market trends and explained why many stocks are continuing to struggle, specifically in sectors like consumer goods. Cramer pointed out that the ongoing bear market is showing no signs of easing, with stock prices persistently declining day after day.
While Cramer acknowledged that inflation remains a concern, with the Federal Reserve continuing to highlight the issue, he encouraged investors to keep in mind the underperformance of these key sectors.
“This is a market that rewards growth regardless of price. So, people will pay up for tech growth, which is all about real demand and pricing power, and they’re avoiding companies that have lost pricing power and offer yields that are too low to compete with Treasurys. I don’t expect that dynamic to change any time soon.”
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“They spent last year hurting the market and this year already many are in the red. It’s not just a continuation people, it’s actually an acceleration.”
He also highlighted that while tech stocks related to artificial intelligence and advanced computing have helped prop up the market, many other sectors have been facing significant challenges. Cramer singled out industries such as real estate, healthcare, housing, biotech, materials, and food, sectors that underperformed dramatically last year and are showing similar weaknesses this year.
“Bottom line: When you look at these super underperforming stocks, all I can say is, maybe the Fed had better be careful for what it wishes for. Companies that represent a gigantic chunk of the real economy have seen their stocks swoon. Could their earnings be that far behind, and could inflation be running its course a lot faster than expected?”
7 Consumer Goods and Retail Stocks on Jim Cramer’s Radar
Our Methodology
For this article, we compiled a list of 7 stocks that were discussed by Jim Cramer during the episode of Mad Money on January 6. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the third quarter of 2024, which was taken from Insider Monkey’s database of 900 hedge funds.
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).
7 Consumer Goods and Retail Stocks on Jim Cramer’s Radar
7. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 49
Cramer talked about Target Corporation (NYSE:TGT) during Mad Money and here’s what the host had to say:
“Now it is true that profitability may be pinching some of these retailers, Walgreens, Dollar General, Dollar Tree, Target, all of which sell these goods and they’ve all seen their stocks just get crushed.”
Target (NYSE:TGT), a leading retail chain, has built its reputation by blending digital shopping convenience with an enjoyable in-store experience. However, the company has recently faced challenges that have impacted its performance. The ongoing inflationary pressures have led consumers to reduce discretionary spending, which has particularly affected retailers like Target, known for offering trendy and upscale products. Over the past year, the stock is up less than 1%.
The shift in consumer behavior has made it more difficult for the company to maintain strong sales, especially when compared to its competitors, such as Walmart, which benefits from its more substantial focus on essential products. According to The Wall Street Journal, the company’s sales have struggled as it faces a volatile operating environment. It has resulted in lower comparable sales growth, which tracks spending in both existing stores and online.
Target’s (NYSE:TGT) comparable sales growth has been behind Walmart’s for 11 consecutive quarters, a concerning trend that highlights the difficulties Target faces in the current retail climate. An issue for the company is how to capture market share when consumers are increasingly focused on essentials rather than discretionary purchases like those typically offered by Target.
As Jerry Storch, a former Target executive, pointed out, the company has long been an upscale retailer centered around discretionary items. Although it introduced grocery offerings to diversify its product range, it has not been able to protect sales of higher-margin specialty items as effectively as hoped.
6. Dollar Tree, Inc. (NASDAQ:DLTR)
Number of Hedge Fund Holders: 40
Cramer discussed how companies like Dollar Tree, Inc. (NASDAQ:DLTR) are seeing their profitability hurt and their stocks nosedive.
“Now it is true that profitability may be pinching some of these retailers, Walgreens, Dollar General, Dollar Tree, Target, all of which sell these goods and they’ve all seen their stocks just get crushed.”
Dollar Tree (NASDAQ:DLTR) operates discount retail stores, with its Dollar Tree segment known for offering a fixed pricing model where items are sold for $1.25. As shoppers increasingly seek value, dollar stores appear to be a natural destination for those looking to save. However, this cost-conscious trend has not been enough to significantly boost sales for Dollar Tree, and the company has faced notable challenges in recent times.
Shares of the company have dropped considerably over the past 12 months, down more than 45%, compounded by leadership changes within the company. In response to these difficulties, it has been adjusting its approach by introducing new price points and revamping store formats to stay competitive. Management has noted that the fourth quarter started slower, partly due to factors like the election and the later-than-usual timing of Thanksgiving.
According to CNBC, retail analyst Peter Keith of Piper Sandler highlighted several challenges for companies like Dollar Tree (NASDAQ:DLTR), including its dependence on lower-income customers who are more affected by inflation. The company’s operating model, with minimal staffing and low wages, has led to disorganized aisles and a negative customer experience. The company is facing mounting pressure due to increased competition, especially from Walmart’s heavy investment in e-commerce.
5. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 45
Talking about Dollar General Corporation (NYSE:DG), Cramer said:
“Now it is true that profitability may be pinching some of these retailers, Walgreens, Dollar General, Dollar Tree, Target, all of which sell these goods and they’ve all seen their stocks just get crushed.”
Dollar General (NYSE:DG), a well-established discount retailer with a significant footprint across the United States, has faced notable challenges in recent years. The company’s stock dropped by 44% in 2024, a performance that mirrored the nearly 45% decline it experienced the previous year. These struggles have largely been said to be due to rising costs and heightened competition, particularly from big-box retailers.
Wall Street analysts have voiced concerns about consumer spending trends in the near term, which are compounded by the retailer’s ongoing competition with larger players in the market. In its second-quarter 2024 results, it reported weaker-than-expected performance, with CEO Todd Vasos attributing the disappointing sales figures to a financially constrained customer base. The trend carried into Q3 2024, where the company posted a 5% increase in sales year-over-year.
The company also faced a sharp decline in earnings, as operating profit dropped more than 25% and earnings per share fell by over 29%. In response to these challenges, Dollar General (NYSE:DG) is implementing its “Back to Basics” plan, which includes initiatives designed to streamline operations and improve profitability. Under this plan, the company is introducing automation in its fulfillment centers, revitalizing older stores, and more to reduce costs, improve customer satisfaction, and enhance margins.
4. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 33
Cramer talked about how companies like Walgreens Boots Alliance, Inc. (NASDAQ:WBA) are striving to keep their prices low.
“Let’s open the discussion, pricing.… I know that Walgreens has tried to keep up offering their own outrageously lower prices on their website, but you probably don’t go to their website.”
Walgreens (NASDAQ:WBA), a key player in the retail pharmacy sector, has faced significant financial hurdles in recent years, with its stock value dropping over 78% in the last five years. The decline has been primarily linked to increased competition from tech-driven retail giants like Walmart and Amazon. As part of its efforts to address these challenges, it has implemented a series of measures, including announcing thousands of store closures and launching a $1 billion cost-cutting program.
The company is also considering divesting its non-core businesses in an attempt to reignite growth. For the fiscal 2025 first quarter, the company reported a loss of $265 million, worse than the $67 million loss reported during the same period last year. The quarterly loss includes costs related to the company’s footprint optimization program, among other reasons. Despite the loss, CEO Tim Wentworth highlighted that the company has made “early progress” in its turnaround plan, although he acknowledged that recovery will take time.
Management also noted that the broader consumer environment remains challenging, with ongoing shifts in retail channels and a tough promotional landscape affecting discretionary product categories. Despite these struggles, Walgreens (NASDAQ:WBA) exceeded expectations in its fiscal 2025 first-quarter results, driven by cost control efforts. However, its retail gross margin declined due to pricing, promotions, and weaker sales of cough, cold, and flu products.
3. The Clorox Company (NYSE:CLX)
Number of Hedge Fund Holders: 41
During January 6’s episode, Cramer discussed The Clorox Company (NYSE:CLX) and said:
“How about Clorox? It got pummeled. It’s down 3.3% today alone… Alright, so let’s go over the reasons. One, maybe the biggest reasons, someone would say interest rates. When long-term interest rates spike as they’ve been doing ever since the Fed started cutting short rates, these stocks have been hammered. That’s what happens.”
Cramer discussed how dividends, which are typically seen as a protective feature for stocks, can become a weakness when bond yields rise. He explained that as long-term rates increase due to supply, particularly with upcoming bond sales by the Treasury, dividend stocks face increasing pressure. As bond prices decline and yields rise, it creates a challenging environment for dividend stocks, even if the companies themselves are unaffected.
“Odd, which brings me to the second reason this group has just been hammered. The dollar’s gotten too strong. These consumer packaged goods companies tend to be very big overseas. That’s not the case with Clorox, which is largely domestic. But you know how our stock market works. The consumer staples all trade together. If the dollar hurts a big international company like Procter & Gamble as it is, it’s gonna reverberate even into Clorox because they’re all in the same sector, and sector ETFs are like gravity.
… Now then there’s the most insidious problem of all, the one that no one is talking about. Let’s open the discussion, pricing. Now, have you noticed that when you buy consumer products on Amazon, they’re discounting heavily, particularly the stuff you see at a drugstore? Have you seen the pressure being put on companies by Costco where it’s like a different world with those prices? They’re crazy low. I know that Walgreens has tried to keep up offering their own outrageously lower prices on their website…”
Cramer highlighted that as retailers face pressure, their suppliers are also likely to be affected. He suggested that companies that experienced strong price flexibility post-COVID may be losing that advantage, as consumers are no longer willing to tolerate high prices. Cramer pointed out that the market might be signaling a rollback of those prices. He also noted that, despite being considered safe stocks for much of his life, companies like Clorox are no longer viewed as secure investments.
Clorox (NYSE:CLX), a prominent manufacturer and marketer of consumer and professional products, has faced a range of challenges in recent years. The company has struggled with rising inflation and operational disruptions, such as a cyberattack in 2023, which have significantly impacted its performance. The stock is down over 33% below its peak in July 2020.
After the COVID-19 pandemic, sales began to decline, and the company saw its operating margins fall into the single digits. The company took a major step on September 10, 2024, by divesting its Better Health VMS business in its entirety. The divestiture is part of the company’s IGNITE strategy.
Moreover, as reported by TipRanks on January 8, Wells Fargo upgraded Clorox’s (NYSE:CLX) stock from Underweight to Equal Weight, adjusting its price target to $157 from $155. Although the firm notes that the company continues to face challenges in achieving sustainable sales growth, especially as the benefits of easier comparisons have ended and sales growth has turned negative once again, it also recognizes several positive factors, including improved visibility for earnings per share. This, according to Wells Fargo, makes an Underweight rating no longer justified.
2. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 54
Cramer recently questioned why Colgate-Palmolive Company (NYSE:CL) stock was down recently, comparing its performance to that of dog food. He explored several potential reasons for the decline, with one of the most significant factors being rising interest rates. According to Cramer, when long-term interest rates increase, as they have since the Federal Reserve began lowering short-term rates, stocks like Colgate’s often face significant pressure.
He pointed out that while dividends are typically seen as a safety net during such times, even they haven’t been enough to protect these stocks from the negative effects of higher interest rates.
“But they become a source of vulnerability when bond yields, the main competition [of] dividend stocks, keep marching higher and they might do that all week because long rates are rising thanks to supply. The Treasury Department sold 3-year note today and the auction fell flat on its face. Tomorrow, the Treasury sells 10-year paper and Wednesday, I don’t know if the market is prepped for a 30-year paper, but there’s a ton coming. As these bonds go down in price and up in yield, things get worse and worse for the dividend stocks, even if there’s actually nothing wrong at the companies.”
Cramer pointed out that another reason for the struggles of consumer packaged goods companies is the strength of the U.S. dollar. These companies, which often have significant operations abroad, are especially impacted by a stronger dollar. Cramer explained how the stock market tends to operate, with consumer staples stocks often moving in tandem.
When the dollar negatively affects a large international company, it can create a ripple effect, bringing down other companies in the same sector, even those that may not be directly impacted. He noted that sector ETFs act like gravity, pulling down all companies within that sector, regardless of their individual performance.
“Now then there’s the most insidious problem of all, the one that no one is talking about. Let’s open the discussion, pricing.”
Cramer discussed the growing issue of pricing pressure, pointing out heavy discounts on consumer products, especially on online platforms. He highlighted the intense competition from large retailers offering low prices, which is creating challenges for businesses.
Cramer suggested that these consumer goods companies are now starting to lose that momentum. He speculated that consumers, who had accepted higher prices during the pandemic, may no longer be willing to tolerate such inflated costs from companies like Procter & Gamble and Colgate. Cramer noted that the market might be indicating that these companies will eventually need to roll back their prices.
“Now, look at this counterintuitive situation. I know it sounds crazy to call Procter & Gamble and Clorox, Colgate risky. These were safety stocks for most of my life, but there’s nothing safe about their stocks anymore.”
Colgate-Palmolive (NYSE:CL) is a leading global manufacturer and seller of consumer goods, known for its wide array of brands such as Colgate, Protex, Sanex, Meridol, Softlan, and Ajax. The company is facing some challenges related to its cost structure in 2024, particularly concerning raw and packaging materials. However, management expects these pressures to arise more from transactional foreign exchange impacts than from the underlying costs of commodities.
At the Morgan Stanley Global Consumer Conference in December 2024, management explained how the company approaches pricing. They adjust prices for the transactional component but avoid making significant adjustments to the translational side, as doing so could harm its competitiveness in local markets. The company takes a comprehensive view of foreign exchange impacts, especially with the recent volatility seen in Latin America.
Colgate-Palmolive (NYSE:CL) management remains confident in the company’s long-term prospects, with expectations for growth in the range of 3% to 5%, which aligns with global economic projections. Additionally, the company has struck a better balance between pricing and volume in 2024, and management expects this balance to continue moving forward.
1. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 68
Cramer mentioned that companies like The Procter & Gamble Company (NYSE:PG) that were once considered a safe bet are not anymore due to various reasons.
“Why is the stock of Procter & Gamble down another 2.7% today? That’s a great company… Alright, so let’s go over the reasons. One, maybe the biggest reasons someone would say, interest rates. When long-term interest rates spike as they’ve been doing ever since the Fed started cutting short rates, these stocks have been hammered. That’s what happens. The dividends, by the way, are supposed to offer some protection, right?”
Cramer pointed out that dividend stocks become increasingly vulnerable when bond yields rise, as bonds offer more competition for investors seeking income. The situation could persist for the entire week, as bond yields continue to climb due to increasing supply. Cramer noted that the U.S. Treasury sold 3-year notes earlier, but the auction did not go well.
He noted the Treasury auctioning off 10-year notes and selling 30-year bonds last week, although Cramer is unsure whether the market is prepared for that. He emphasized that as bond prices fall and yields climb, the pressure on dividend stocks intensifies, even if the underlying companies remain in good shape.
“Odd, which brings me to the second reason this group has just been hammered. The dollar’s gotten too strong. These consumer packaged goods companies tend to be very big overseas… The consumer staples all trade together. If the dollar hurts a big international company like Procter & Gamble as it is, it’s gonna reverberate even into Clorox because they’re all in the same sector, and sector ETFs are like gravity. They pull all their subjects down, even the ones that shouldn’t.”
Cramer pointed out another major issue many are overlooking: pricing. He noted that heavy discounts on consumer products and intense pricing pressure is making it harder for such businesses to keep up. Cramer added:
“… but if the retailers are being squeezed, then their suppliers are definitely gonna be squeezed too. Maybe these companies have had so much of a run, so much price flexibility post-Covid that they’re finally losing it. Maybe the consumers had it. We’ll no longer tolerate COVID-era high prices from the likes of a Procter or a Colgate. Maybe the stocks are saying prices will indeed be rolled back…
The stock at Procter & Gamble is, oh, it’s tempting. It’s tempting, but as long as bonds go down in price, as long as the dollar stays high or goes higher, and until we see the earnings, find out there really is some price pressure that I’m sensing, it’s too risky to buy… Now, look at this counterintuitive situation. I know it sounds crazy to call Procter & Gamble and Clorox, Colgate risky. These were safety stocks for most of my life, but there’s nothing safe about their stocks anymore.”
Procter & Gamble (NYSE:PG), a major player in the consumer packaged goods industry, is facing several challenges despite its global presence. Recently, the company reported sluggish sales growth, attributed to minimal price increases and ongoing weaknesses in important market segments.
It is adjusting its marketing in China after struggling with lower sales, especially during the COVID-19 pandemic and shifting consumer preferences. Despite some positive trends, weak consumer confidence is hurting P&G’s higher-end products. CFO Andre Schulten noted that both China and the Middle East have posed challenges, with China facing low confidence and the Middle East impacted by conflict. The company expects recovery in China to take several more quarters.
Procter & Gamble (NYSE:PG) is also grappling with significant foreign exchange volatility, particularly with the Brazilian real, which is expected to negatively impact its results for the second quarter. As per Schulten’s comments at the Morgan Stanley Global Consumer Conference in December ‘24, while the second quarter has largely met expectations, the company faces currency headwinds in countries like Brazil, Mexico, and Russia.
However, Schulten expressed confidence in the company’s ability to adapt, citing the company’s flexibility, productivity, and ability to adjust product mixes both geographically and across product categories.
While we acknowledge the potential of The Procter & Gamble Company (NYSE:PG) as an investment, our conviction lies in the belief that 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 PG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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