If you’re wondering which consumer staples stocks to sell this month, look no further. The consumer is hanging tough. Despite persistent inflation and elevated interest rates, Americans are continuing to spend. The Commerce Department recently reported that retail sales in March rose 0.7%. Data for February reflects 0.9% growth, which was the biggest gain in more than a year, and higher than an initial estimate of 0.6%. Economists polled by the Reuters news agency had forecast that April retail sales would increase 0.3%. On a year-over-year (YOY) basis, March retail sales were 4% higher.
While the continued spending on everything from clothing and groceries to new vehicles and travel is good news for the economy, the data is starting to show some behavioral changes among people. Businesses report that consumers are seeking out cheaper generic alternatives to their name brand products, and the latest Bank of America (NYSE:BAC) credit card data shows that lower-income spending is outpacing spending by more affluent Americans as the wealthy tighten their purse strings.
Should consumer spending falter in coming months, it would be bad news for the economy and could roil the stock market. Here are three consumer staples stocks to sell in May before they crash and burn.
Consumer Staples Stocks to Sell: Unilever (UL)
British consumer goods company Unilever (NYSE:UL) is the company behind consumer products ranging from Dove soap and Axe body spray to Degree deodorant and Vaseline. The company also makes some limited food items such as Hellman’s mayonnaise and Knorr bullion cubes. Unilever and its stock have struggled mightily for many years now with the share price down 14% over the last five years. This has led to the decision to spin-off Unilever’s ice cream unit that includes brands such as Ben & Jerry’s and Magnum.
The company said that the separation of its ice cream division, arguably its most popular business unit, is part of a broad restructuring that will see the company cut 7,500 jobs and achieve cost savings of more than $850 million. Going forward, Unilever will be restructured into four business units: beauty and wellbeing, personal care, home care, and nutrition. Management says that its ice cream unit, which generated $8.57 billion in revenue in 2023, will perform better as a standalone business. Analysts seem skeptical.
Walgreens Boots Alliance (WBA)
Retail pharmacy chain Walgreens Boots Alliance’s (NASDAQ:WBA) latest earnings report contained some encouraging signs. But the company is by no means out of the woods. This is, after all, a company that was kicked out of the Dow Jones Industrial Average for the subpar performance of its stock. Year-to-date, WBA stock is down 33%. The company’s share price today is 66% lower than five years ago. Walgreens most recently lowered its profit outlook for the year as it grapples with a “challenging economy.”
Walgreens has struggled with slumping demand for Covid-19 medications, low pharmacy reimbursement rates, and a failed push into healthcare services. New CEO Tim Wentworth has undertaken an aggressive cost reduction program, announcing in January that he was cutting the dividend payment by nearly 50%.The question is: will it be enough to turn Walgreens around. WBA stock was removed from the Dow Jones Industrial Average earlier this year and replaced by e-commerce giant Amazon (NASDAQ:AMZN).
Procter & Gamble (PG)
Procter & Gamble (NYSE:PG) continues to struggle as consumers switch to lower priced generic versions of its products, a move being taken in response to the company raising prices. PG stock recently fell after the company behind Tide laundry detergent and Gillette razor blades reported mixed first-quarter financial results that showed its sales missed Wall Street’s target. Management has said repeatedly that price increases prompted by inflation are pushing consumers to cheaper generic products.
In its Q1 print, Procter & Gamble announced EPS of $1.52 versus analysts forecasts of $1.41. Revenue totaled $20.2 billion, which was below forecasts of $20.41 billion. Sales were up a slight 1% from a year earlier. The company reported overall flat sales volumes for Q1, while the average prices across its product categories rose 3%. Company executives warn that challenges may persist if inflation remains sticky, requiring continued price hikes.
PG stock is up 5% over the last 12 months, missing out on most of the bull market.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
