Survive and prosper is the consumer goods industry trend

Many retailers have closed all, or trimmed the number of, their Canadian stores. This gives the successful survivors room to expand. Continue to invest in consumer goods stocks such as Canadian Tire, Loblaw Companies and Metro Inc.

Many consumer goods retailers are retreating or shrinking. American retailer Target Corp. is closing its 133 stores and retreating to the U.S. Japanese retailer Sony Corp. plans to close its 14 Canadian stores. Dutch retailer Mexx Canada is closing its 95 Canadian stores. Domestic chains are also shrinking or disappearing. Reitmans Canada is shutting its 107 Smart Set stores. Jacob Inc. is shutting down its 92 stores. The interconnected Bombay, Benix & Co. and Bowring & Co. chains are collectively closing 110 outlets.

All this has improved the outlooks of surviving retailers. They can thrive even more with fewer competitors. Over the past year, consumer goods stocks have advanced by about 35 per cent. This is far better than the approximately 16 per cent rise of second-place manufacturers.

Keep buying these consumer goods stocks

Consider Canadian Tire (TSX─CTC.A), one of our Key stocks. It has overcome resistance levels and recently hit an all-time high price per share. We expect the company to eventually split its shares to make them more accessible to retail investors, who also happen to be shoppers.

Canadian Tire’s same-store sales are rising. It keeps buying back its shares. As a result, the company should continue to earn record profits. It’s now expected to earn $8.03 a share this year and $8.83 a share next year. As its earnings per share rise, so do its dividends. Canadian Tire now pays $2.10 a share. We expect it to remain a ‘dividend aristocrat’ by raising its dividends in the years ahead.

Food retailers are also doing well. This includes Loblaw Companies (TSX─L) and Metro Inc. (TSX─MRU). We reported on their solid performances earlier this year.

Another point in favor of consumer goods stocks that sell staples is their stability. Even in difficult times, consumers need to buy food. In fact, to the extent that they eat less often in restaurants, the sales of supermarket chains are likely to hold up. This beats the instability of, say, the resources sector. Over the past year this sector is down by 12 per cent. That’s because the prices of most natural resources are down, of course.

Buy our recommended consumer goods stocks for long-term share price gains as well as dividends that are often attractive and that rise steadily.

 

The Investment Reporter, MPL Communications Inc.
133 Richmond St. W., Toronto, On, M5H 3M8, 1-800-804-8846

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