Yet, not all consumer staples stocks are equal. The strongest players boast moats, or sustainable competitive advantages, that keep rivals at bay and ensure long-term profitability. Today, we’ll dive into three consumer staples stocks with strong brands and loyal customer bases to discuss why they may deserve a spot in long-term portfolios.
Albertsons (ACI)
Food and drug retailer Albertsons (NYSE:ACI) is first on our list of consumer staples stocks with moats. Founded in 1939, Albertsons offers various products, including groceries, general merchandise, health and beauty care, pharmacy and fuel. €‹ With a market cap of over $12 billion and a dividend yield of 2.3%, ACI presents an attractive opportunity for long-term investors seeking stable returns in the consumer staples sector.
Recent earnings showed impressive quarterly metrics, with a revenue of $18.6 billion, compared to $18.2 billion a year ago. Albertson’s identical sales increased 2.9%, while digital sales increased 21%. Net income was $0.62 per share, having increased from $0.20 per share a year ago.
Albertson’s strong quarterly performance is due to its successful omnichannel approach and commitment to innovation, making shopping more convenient for customers. The Idaho-based retailer’s focus on profitable and sustainable growth has positioned it well for the future. As a result, its loyalty members have grown by 17% to 38.5 million during the last quarter.
Yet, since the start of 2024, ACI stock has lost 8%, underperforming the broader market index S&P 500, which has gained around 10%. Lately, legal issues have partly unnerved investors: the Federal Trade Commission (FTC) has reservations about Albertson’s proposed merger with Kroger (NYSE:KR). In August, the Denver District Court will hold a hearing on the lawsuit challenging this merger.
As a result of the recent weakness in ACI stock, the retailer’s valuation remains attractive, with a forward price-to-earnings (P/E) of 8.1x and a price-to-sales (P/S) ratio of 0.15x. Moreover, Wall Street maintains a bullish outlook on the stock, with a consensus 12-month price target of $24.5, representing an upside potential of 16% from current levels.
Coca-Cola FEMSA (KOF)
As the world’s largest franchise bottler of Coca-Cola products by volume, Coca-Cola FEMSA (NYSE:KOF) is the next of our consumer staples stocks with moats. Its strong brand recognition, extensive distribution network and diversified product portfolio contribute to its wide economic might.
The Mexico-based company produces and distributes various beverages across Latin America, including carbonated soft drinks, juices, teas, and water. KOF’s market cap stands at $15 billion, reflecting its significant presence in the highly competitive beverage industry.
According to recent fourth-quarter earnings, year-over year, the beverage company enjoyed volume growth of 6.1%, revenue increase of 8.0%, and operating income growth of 7.3%. Coca-Cola FEMSA’s ability to maintain leadership in several countries, its strategic partnerships, strong financials and operational efficiency underscores its robust competitive advantage.
Yet, so far in 2024, KOF shares have remained flat. Meanwhile, over the past 52 weeks, the stock has traded between $69.33 and $104.38. The company’s forward P/E ratio is 18.2x, while the P/s ratio stands at 1.3x.
Analysts maintain a bullish outlook on KOF stock, with a consensus 12-month median price target of almost $109. As Coca-Cola FEMSA continues to expand its product portfolio, optimize its distribution network and capitalize on growth opportunities in its key markets, investors may find KOF stock an appealing addition to their portfolios.
iShares Global Consumer Staples ETF (KXI)
We conclude our discussion of consumer staples stocks with moats with an exchage-traded fund (ETF). The iShares Global Consumer Staples ETF (NYSEARCA:KXI) offers investors diversified exposure to companies that produce essential goods, such as food, beverages, household items and personal care products. With a dividend yield of 2.95% and an expense ratio of 0.41% per year, KXI provides an attractive opportunity for income-seeking investors looking to tap into the defensive nature of the consumer staples sector.
KXI has 100 holdings, while the portfolio is well-balanced across three main sectors: Food, Beverage & Tobacco (48.12%), Consumer Staples Distribution & Retail (26.02%) and Household & Personal Products (25.30%). This diversification ensures that the ETF is not overly reliant on any single sub-sector within the consumer staples space.
Among the fund’s top five holdings €‹ are household names such as Procter & Gamble (NYSE:PG), Costco Wholesale (NASDAQ:COST), Nestle (OTCMKTS:NSRGY), PepsiCo (NASDAQ:PEP) and Coca-Cola (NYSE:KO). These companies have a long history of delivering consistent returns and are known for their strong brand loyalty and pricing power. Additionally, KXI includes several well-known non-US companies, such as Unilever (NYSE:UL), L’Oreal (OTCMKTS:LRLCY), Diageo (NYSE:DEO) and British American Tobacco (NYSE:BTI).
In terms of performance, the KXI fund is up about €‹1.5% year-to-date. While this return may not be as impressive as growth-oriented sectors, the consumer staples sector is known for its stability and defensive characteristics during economic downturns.
On the date of publication, Tezcan Gecgil 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.
Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.