Staples stock and Consumer Discretionary Stocks
As the festive vibes slide in, spending lists have been filled with wants and needs. Many people have made it to the stores and restaurants during this period as they celebrate the festive season. So let’s look at a combination of two categories: Staples Stocks and Consumer Discretionary Stocks.
What are staples stocks and consumer-discretionary stocks? In short, staples stocks, unlike staples structures, are stocks focused on necessities, whereas in contrast, consumer-discretionary stocks are stocks focused on wants rather than needs.
Staples Stock
Shoprite Holdings Limited (JSE:SHP)
Despite the harsh global lockdown response and the unrest in South Africa, the group extended its gains into the festive seasons, reaching a high of R200 and leaning towards its all-time high since 2018 of around R270. Considered as one of the world's largest retailers, Shoprite has 2 892 outlets spread across 14 African countries as of the beginning of the 2021 Fiscal Year (FY21).
The group was amongst companies that had the opportunity to operate under various restrictions, providing daily necessities through some of its large brands. In July 2021, the company reported an increase in merchandise sales of 8.1% from the previous comparative period (PCP) to R168 billion, with the SA Supermarket segment reporting robust growth during the period despite the closure of alcohol sales for 144 days. Profits from operations increased by 19% to R9.6 billion from the PCP, with profits before tax increasing to R6.9 billion, representing a 23.1% growth for the period.
The above mentioned was followed by a quarterly report in September 2021, which reflected growth across the group's core businesses. Commenting on the outlook during the reporting period, the group said:
"Looking ahead to the festive trading season, we can confirm the group is well positioned and we believe adequately stocked across the board. As such we are optimistic regarding our ability to execute on our plans to provide unsurpassed value and range to our customers over this all-important period in our calendar."
On track to open 131 new stores for FY22, Shoprite further announced in December that it would be acquiring 111 stores made up of Masscash Cash & Carry and Cambridge Foods. This transaction is expected to occur during 2022 once all conditions are met. The group also announced that it would be "pioneering" Sixty60, a delivering app of Checkers.
"Delivering this functionality is an example of continued digital and data advances made possible.
"Leading with customer centricity by combining the benefits of reward card savings, customer data and 60-minute delivery." The group said.
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Consumer Discretionary Stocks
McDonald's Corp (US:MCD)
Trading at an all-time high, McDonald's is amongst the largest fast-food restaurants globally. The company has over 39 000 restaurants in 119 countries. In 2021, notwithstanding the global closure on restaurants, McDonald's strongly recovered after the early lockdown days reaching an all-time high of $268, as of writing.
"COVID-19 continued to result in some instances of government restrictions on restaurant operating hours, limited dine-in capacity and, in some cases, dining room closures", the company said on the impact of the global pandemic.
"The Company has continued to apply appropriate precautionary measures, including following the guidance of expert health authorities, to protect the health and safety of its people and customers and expects some operating restrictions in various markets so long as the COVID-19 pandemic continues."
As restrictions eased, more restaurants started to operate. Looking into McDonald's latest financials, the company, during its nine months which ended on 30 September 2021, reported a 24% growth in revenue for the period to $17.2 billion compared to $13.8 billion of the previous period. Income from operations surged to $7.2 billion, representing a 54% growth during the period from PCP, with net income increasing by 76% to $5.9 billion.
According to the company, "Results for the quarter and nine months reflected stronger operating performance across all segments due to higher sales-driven restaurant margins as a result of fewer restaurant closures and the easing of COVID-19 restrictions compared with the prior year.
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Informed decision
With inflation being a topic during the period, as an investor, one would have to take into consideration the effects that may come into play as prices of goods and services rise; as this may create opportunities to buy the dip. In addition, with tapering, volatility may increase and that may result in long term gains.
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Sources – EasyResearch, McDonald's Corp, Shoprite Holdings Limited, JSE SENS
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