Blame Walmart For Consumer Firms' Worst Month In Nine Years
The US may be enjoying soaring consumer confidence and signs of strengthening wage growth, but food, beverage and household companies just logged their worst month since 2008.
The main culprit: Walmart, which fell the most in eight years after posting disappointing fourth-quarter e-commerce growth.
The world’s largest retailer is just the fifth-heaviest constituent of the S&P 500 Consumer Staples Index, but its 16% plunge sent ripple effects across the industry group.
Procter & Gamble, which makes up 11% of the gauge, relies on Walmart for 16% of its revenue. For PepsiCo, it’s 13% of sales, and 5% for Coca-Cola.
A slide in Walmart underscores the importance of retail giant’s push to expand online operations as it fights with Amazon for the customers that are increasingly turning to electronic devices for their purchases.
The biggest monthly drop in consumer stocks since the financial crisis shows that a pickup in economic growth, consumer confidence at a generation high and wage growth exceeding expectations don’t necessarily translate into higher prices for food and beverage stocks.
“The environment for consumer-staples companies is tricky,” said Kenneth Shea, senior analyst at Bloomberg Intelligence. “It’s a tough battle. Consumers are opting to click for the purchases as opposed to walking around, and companies have to adjust.”