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stocks to buy


11 CONSUMER STOCKS FOR INFLATIONARY TIMES


CONSUMER SPENDING MAY BE COOLING DUE TO INFLATION, BUT THESE STOCKS SHOULD
DELIVER THE GOODS TO INVESTORS.

by: Jeff Reeves
August 8, 2022
August 8, 2022

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U.S. inflation hit a four-decade peak in June, with prices rising roughly 9.1%
according to the U.S. Bureau of Labor Statistics. That has understandably
rattled investors who are worried about cutbacks in spending as Americans look
to fend off the pain at the gas pump and grocery aisle.

However, there are still many consumer stocks that have a lot to offer despite
this period of upheaval. Wall Street analysts have seen the same inflation data
that we all have, and yet these experts are quite bullish on a select group of
companies right now. That's because they are closely monitoring financial data
on individual companies, even as they are watching consumer price data.

The following 11 consumer-related stocks all get top marks from these experts
right now. Some companies have seen their share prices rise in a down market, a
few seem like bargains after bearish investors overreacted and sold off shares
sharply, and others have long-term growth outlooks that make them attractive if
you can look past short-term disruptions.

Depending on your personal investing strategy, one of these 11 consumer stocks
may be worth an investment even as we face uncertainty in 2022.

 * Biden's Inflation Reduction Act: Investing Winners and Losers


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1 of 11


BATH & BODY WORKS, INC. (BBWI)

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In mid-2021, consumer conglomerate L Brands split off its Bath & Body Works
(BBWI) unit to separate it from Victoria's Secret & Co (VSCO). That initially
benefitted BBWI stock as shares rallied strongly through the end of last year;
however, BBWI stock is now down about 50% from its 52-week high thanks to a
risk-off environment lately.

 * The Best (And Worst) Stocks for Rising Prices

Still, the long-term outlook is bright for this newly focused stock. As a
personal care products company, Bath & Body Works should enjoy more consistent
sales than clear-cut discretionary plays that consumers can abandon in tough
economies, such as entertainment.  And when it comes to personal care products,
customers tend to be brand loyal instead of shopping around to pinch pennies on
inferior products or new items that do not fit their personal tastes and
routines.

Analysts at Raymond James just put a Strong Buy rating on BBWI stock in July,
with a mammoth $45 price target that is nearly double current share prices. They
argue that as comparable sales normalize in the wake of the spinoff and as
supply chain and shopping trends get back to pre-pandemic levels, this
personal-care retailer has much brighter days ahead. Separately, Wells Fargo and
Piper Sandler both reiterated Overweight ratings in recent weeks as a sign of
Wall Street optimism for this consumer stock.

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2 of 11


COSTCO WHOLESALE CORP. (COST)

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Costco Wholesale Corp. (COST) enjoys an almost cult-like following among U.S.
consumers. From its deep discounts on bulk products and gasoline to its popular
private-label brand Kirkland, ask a longtime member of COST why they prefer to
shop there and you will surely get an earful.

This loyalty really matters in a time of rising prices, because consumers are
starting to be more judicious about their spending.

 * 10 Stocks to Buy When They're Down

COST stock was already on an uptrend after it ended its fiscal 2021 in September
with a net sales growth of almost 18%. And looking forward, fiscal 2022 is
expected to see growth of between 5% to 10% in sales on top of that. But the
real story is one of rising profitability, as earnings per share are forecast to
jump from $11.09 last year to $13.06 this year and $14.49 next year. That is an
expansion of 18% and 11%, respectively.

What's even more compelling is that Costco’s membership model has been proven to
reduce "shrinkage" (or loss because of shoplifting, for example) and adds a
reliable source of cash flow. With 1.3 million members paying $60 or more a pop,
this company has a firm foundation that will help it pay the bills regardless of
any short-term disruptions in sales.

Jeffries recently maintained its Buy rating on COST stock in June, with Raymond
James, Truist and Baird all offering similar bullish ratings in May.

 * 30 Best Kirkland Products You Should Buy at Costco


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3 of 11


DOLLAR TREE, INC. (DLTR)

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It's reductive, but it's true – when times get tough, discounters like Dollar
Tree, Inc. (DLTR) are safe havens in the consumer sector for investors who want
to avoid the fallout of a shift in consumer spending.

In 2015, Dollar Tree and Family Dollar joined forces to create one of the
biggest staples discounters out there. And with locations that cater to urban
customers via strip malls or underserved communities that may not support a
full-service supercenter from Walmart (WMT), a Dollar Tree store is often one of
the few places where lower-income Americans can get what they need for their
pantries, closets and medicine cabinets.

 * 15 Best Things to Buy at Dollar Stores (Dollar Tree Included)

As a result, DLTR is riding high even while consumer spending disruption is
causing many stocks to roll back their forecasts. In the current fiscal year as
well as next year, revenue is set to grow by 5% to 10%. More impressive is the
earnings per share growth, however, with EPS set to leap from $5.80 last year to
a whopping $8.14 this fiscal year if forecasts hold. That's more than a 40%
increase in profits.

Wall Street loves to see numbers like this, and the top ratings from analysts
are proof. Citigroup, BMO, Deutsche Bank, Morgan Stanley and Barclays are just a
few of the leading investment firms that have issued Buy or similar ratings on
this stock since May.

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4 of 11


LCI INDUSTRIES (LCII)

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In the wake of the COVID-19 pandemic, there have been a few big shifts in
American consumer culture–and some of the big ones are a reconnection with the
great outdoors and a desire to get out of the city.

This trend has been a boon for LCI Industries (LCII), a firm that manufactures
and maintains recreational vehicles (RVs). It's not just these big-ticket
vehicles either, which run buyers six figures apiece. It is also all the
after-market gear that provides big creature comforts for folks looking to get
away: portable patio furniture, awnings, premium mattresses, televisions and
sound systems.

In fiscal 2022, LCII is riding recent tailwinds to a projected revenue growth
rate of 25%. Earnings are growing even faster at a roughly 60% growth rate. And
then there's the generous 3.6% dividend on top of the potential for share
appreciation driven by these fundamentals, too.

 * 10 Dividend Growth Stocks Delivering Impressive Increases

There's clearly risk here, as there is for all consumer stocks in 2022. However,
RVs are decidedly a luxury purchase given the big price tags, so they tend to
see more resilient sales than compact cars or other vehicles in a downturn. That
should add some measure of stability, even amid a challenging economic outlook.


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5 of 11


LOWE'S COMPANIES INC. (LOW)

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When it comes to home improvement retailers, there's pretty much a duopoly in
the U.S. right now between Home Depot (HD) and its competitor Lowe's (LOW). But
when it comes to Wall Street expectations and bullish forecasts, there's really
only one stock to consider – with LOW the clear winner.

Both companies are largely stagnant, with mature domestic operations growing at
a single-digit pace for sales and earnings. However, Lowe's boasts a forward
price-to-earnings ratio of less than 14 and a price-to-sales of about 1.3 while
HD has a forward price-to-earnings ratio of about 18 and a price-to-sales ratio
of 2.0. That makes LOW more attractive from a valuation perspective.

Furthermore, Lowe's has greater support among Wall Street analysts. Wells Fargo
recently reiterated its Overweight rating in June, and Truist, Davidson and
Jefferies all maintained Buy or better recommendations in May. The consensus
price target of about $240 per share predicts about a 30% upside, and presents
one of the best opportunities among consumer stocks right now.

 * The 25 Cheapest U.S. Cities to Live In

Clearly, there is uncertainty around consumer spending trends. The housing
market softened in July, but overall inventory is far below demand.  And that
means LOW could be a good investment for those who aren't afraid of
consumer-oriented plays despite broader volatility.

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6 of 11


MERCADOLIBRE, INC. (MELI)

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As one-time darling Amazon.com (AMZN) has crashed and burned over the last
several months, many e-commerce plays have been caught up in the negativity,
too. However, fast-growing overseas retailer MercadoLibre (MELI) remains highly
rated and continues to offer a great long-term outlook despite this volatility.

MELI is often referred to as the Amazon of Latin America, and for good reason.
It operates a consumer-focused internet marketplace that dominates the most
populous and lucrative regions in the area, including thriving city centers in
Brazil and Argentina. Thanks to its rapid expansion, Wall Street is expecting
phenomenal revenue growth of nearly 50% this fiscal year and another 30%
expansion in FY2023. Profitability is surging too, with consensus forecasts for
earnings to grow five-fold in fiscal 2022.

 * How to Invest for a Recession

To support its maturing e-commerce operations, MercadoLibre is also branching
out into other long-term technology solutions including mobile payments. And
with Amazon on its heels, worried more about weathering the storm than putting
the screws to this smaller competitor, MELI is set up to shine in the months and
years to come even if shares haven't done particularly well in the recent past.

Wall Street's outlook is bullish, with New Street Research, Citi, Goldman,
Credit Suisse and others all rating the stock Buy or better in the last several
months despite broader volatility. That bodes well for investors who can look
past the recent headlines and seize the long-term opportunity in this consumer
stock.


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7 of 11


MILLERKNOLL, INC. (MLKN)

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Though not exactly a brand familiar to most consumers, MillerKnoll, Inc. (MLKN)
operates a furnishings company that sells a host of residential storage
solutions and office desks and chairs under brands that include Knoll,
HermanMiller, Edelman and Holly Hunt.

MLKN stock was hit hard over the last year or two thanks to the impact of the
pandemic and supply chain disruptions. However, the company is on the upswing as
measured by its fundamentals; at the end of June, the Michigan-based company
reported strong sales growth of 77% over the prior year, and margins that jumped
230 basis points.

 * How Senate Breakthrough on Climate Could Benefit ESG Investors

Looking forward, the company continues to realize big cost savings and synergies
in the wake of the $1.8 billion acquisition of design brand Knoll in 2021. The
recovering sales will align very well with this strategic restructuring and
should continue to drive shareholder value in the long term.

With a consensus price target of almost $50 right now, Wall Street analysts are
projecting shares to nearly double if projections hold. The icing on the cake is
a 2.8% dividend that is only about one-third of projected earnings. That means
this payout isn't just sustainable, but ripe for future increases down the road.

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8 of 11


NIKE INC. (NKE)

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As one of the most dominant consumer brands on the planet, Nike Inc. (NKE)
clearly has staying power. But beyond its impressive wholesale footwear and
sports apparel businesses, it is increasingly proving itself to be a force in
direct-to-consume sales in the wake of the pandemic – cutting out middlemen to
reap bigger margins, keep inflation at bay and deliver shareholder value.

In fact, the sportswear giant has spent the better part of four years cutting
the accounts of its retail partners to have a better hold on its distribution
and sales channels – with wholesale accounts declining by as much as 50%,
according to some reports, while sales have marched ever higher.

Although COVID-19 restrictions in China have impacted the company via supply
chain disruptions and disappointing international sales results, the company is
definitely looking up as these situations start to normalize. Right now, Wall
Street is forecasting a roughly 10% revenue expansion both this fiscal year and
next year.

 * Kip ETF 20: The Best Cheap ETFs You Can Buy

The analyst community continues to rate NKE stock highly; Goldman, Barclays,
Cowen, Deutsche Bank, Wedbush and Guggenheim all have reiterated Buy or better
recommendations on this top consumer stock since late June. That kind of
consensus support is a tremendous vote of confidence for shareholders.


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9 of 11


PATRICK INDUSTRIES, INC. (PATK)

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Specialty manufacturer Patrick Industries, Inc. (PATK) is a mid-cap stock most
investors haven't heard of. That's because it doesn't have any directly
consumer-facing operations, instead providing a host of materials and products
to the marine industry, manufactured home companies and various outdoor and
camping product companies.

 * 10 Bond Funds to Buy Now

As with previously mentioned LCI Industries, outdoor recreation is a great
business to be in after the pandemic. Consider that everyone who ran out and
purchased a boat during 2020 and 2021 is now a prospective customer of PATK’s
Tumac brand, which makes waterproof covers, or its SeaDek flooring and boat dock
unit.  And anyone who bought a new or used RV may now be in the market for its
premium Williamsburg captain's chairs, couches and décor.

These are niche products, to be sure, but PATK is a dominant company in this
particular niche. And judging by its roughly 20% revenue growth that's projected
this year, it has a lot of growth still ahead of it.

Both MKM and Truist initiated coverage recently with Buy recommendations, and
Patrick Industries remains among the most highly-rated stocks on Wall Street
right now.

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10 of 11


TJX COMPANIES, INC. (TJX)

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Apparel and home fashions retailers HomeGoods, TJ Maxx and Marshalls all fall
under the banner of consumer stock TJX Companies, Inc. (TJX). That makes this
company quite sensitive to household spending trends, but based on bullish Wall
Street analysis lately, it seems that this is a stock that could be in store for
big-time returns after the dust settles.

At the beginning of 2022, TJX operated about 3,500 stores: 1,280 or so T.J. Maxx
locations, 1,150 Marshalls and 850 HomeGoods stores.  Up until a few years ago,
the company was fairly reluctant to enter e-commerce sales channels and instead
continued to rely almost wholly on brick-and-mortar business.

That changed in 2020 thanks to the pandemic, and it has not always been an easy
transition. But now that the company has fully embraced the digital future,
things are looking bright despite a generally gloomy consumer outlook on Wall
Street. TJX is projecting high single-digit growth both this year and next, with
margins expanding thanks to e-commerce opportunities and pricing power.

 * ETFs Are Now Mainstream. Here's Why They're So Appealing.

Morgan Stanley, Baird, Credit Suisse, JPMorgan and others all reiterated their
"buy" rating on the company after a very impressive May earnings report that
included higher-than-expected forecasts for the full year even as other big box
brands like Walmart (WMT) missed the mark. This bodes well for future
performance, making this a top consumer stock in a difficult market.


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11 of 11


TAPESTRY, INC. (TPR)

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Luxury brands parent Tapestry, Inc. (TPR) is the firm behind Coach, Kate Spade,
and Stuart Weitzman products and apparel. Product lines include handbags,
fashion accessories, jewelry, eyewear and fragrances for sale at department
stores. The company also operates nearly 2,000 retail locations that sell these
in-demand goods directly to consumers.

This powerful brand family, along with the pricing power that comes with
high-quality and luxurious offerings, has allowed Tapestry to weather a rocky
environment better than most. Specifically, TPR is projecting 15% to 20% growth
in the top line this year even as inflationary pressures and cutbacks take their
toll on other consumer stocks. Additionally, strong international sales –
including in mainland China, which is about a year behind the U.S. and Europe in
the re-opening of its consumer-focused economy after COVID-19 – will allow for
opportunities that other wholly domestic consumer stocks don't enjoy.

 * 6 Satisfying Food Stocks That Look Appetizing Right Now

Thus far in 2022, Tapestry has been able to raise prices to offset inflation on
raw materials without impacting demand, growing sales across all three of its
brand segments and through its e-commerce operations. And with a reliable
dividend yield of about 3% on top of all that, it's hard to overlook this top
consumer stock.

That's probably why Wall Street rates TPR so highly, with Wells Fargo
reiterating its Overweight rating in July, and Jeffries upgrading the stock in
June.

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