The world has started to figure out how to live with the coronavirus until it eventually goes away, but it would be naive to pretend things are back to their pre-COVID normal. Many consumers are still self-quarantining at home as much as possible, and millions of people remain out of work. Consumer-facing companies are adapting as quickly as they can, which in some cases means playing offense rather than defense.
To that end, investors will want to keep an eye on four particular consumer staples names this month. Some have earnings announcements in the queue, while others are due to drop big news. All of it collectively reflects the sector's present pulse, as these names are all more or less in the same boat.
1. Walmart+ launch due any day now -- maybe
The world's biggest retailer, Walmart (WMT 0.60%), is expected to release its second-quarter numbers on Aug. 18. They should be good because -- well, COVID-19. The company makes it easy for people to stay at home, or at least stay in their cars, and still buy the basics they need. Curbside pickup has proven a boon for its business.
That's not the news a whole slew of shareholders and shoppers are waiting on, however. While Walmart never explicitly said when it would go live with the service, its subscription-based Walmart+ could launch any day now. Some were even anticipating a launch as early as last month, just a few weeks after the company confirmed it was working on something along the same lines of Prime, from Amazon.com.
The company's offered little in the way of details, but the service is widely expected to include things like same-day delivery of online orders, fuel discounts, and more. Investors will want to watch for these headlines, mostly to see if the retailer makes Walmart+ compelling enough to draw consumers away from Amazon's alternative.
2. Making sense of Mondelez
Food company Mondelez International (MDLZ -0.16%) already delivered its second-quarter numbers on Tuesday of last week. They were good. Organic growth was flat, mostly driven down by weakness in its Latin American operations, where business was particularly tough to do. Even so, strong sales growth in North America led the company to a 16% year-over-year improvement in per-share profits. The top and bottom lines were both much better than anticipated.
There's still some story left to play out here, however. During its second-quarter conference call, CEO Dirk Van de Put explained that the company would be reducing its total product stock-keeping unit (SKU) count by 25% to simplify its supply, and lower related costs in the process.
The premise sounds reasonable enough on the surface, but such decisions can sometimes have unintended consequences -- like crimping sales of one product that's driven by the purchase of another related product. Van de Put also didn't provide much detail as to a timeframe for the culling of its product assortment. Hopefully, the analyst community will start to chime in on the matter with some perspective this month.
3. Don't forget about Target
The aforementioned Walmart and Amazon have been the big focal points of consumerism in a world rattled by COVID-19. Grocery giant Kroger has been in the mix too. There's another important retailing name that's been largely left out of those discussions, though, and shouldn't have been. That's Target (TGT -3.26%), which plans on posting its second-quarter numbers on Aug. 19.
As it stands right now, analysts are modeling a little more than 6% sales growth for the quarter that ended in July. They don't think that will be enough to drive earnings growth. In fact, they're calling for a sizable earnings dip, from $1.82 per share in the second quarter of last year to $1.44 this year. Given how quickly the retailer has begun to ramp up the number and scope of curbside pickups, though, in addition to the fact that it was already able to offer same-day delivery in many locales through its Shipt unit, those outlooks may be easily topped.
Or maybe not. That's why it's a report worth watching. It may shed some more light on the fine-but-tricky art of selling goods online meant for pickup or delivery.
4. Kraft Heinz's marketing miscues
Finally, food name Kraft Heinz (KHC -0.83%) technically topped its second-quarter estimates. Those estimates weren't exactly impressive, though, given the backdrop. Organic sales were up a bit more than 7% year over year, and the company's adjusted per-share profits grew a little less than 3%. In some consumer staples categories where the Kraft name used to be king -- like cheese -- Wells Fargo analyst John Baumgartner says consumers are opting for higher-end choices. Baumgartner noted the same about Kraft's deli meat brand Oscar Meyer.
Kraft Heinz has a plan. Chief of its U.S. business, Carlos Abrams-Rivera, commented during the company's recent conference call that the company is "going after this [mostly millennials, who are finally showing some interest] aggressively with a second-half plan that includes a 40% increase in working media dollars versus a year ago."
Bear in mind, however, that this is the same Kraft Heinz that just a couple of quarters ago cut the number of creative and design (advertising) agencies it works with in half, then used that savings to buy 30% more media, or advertising space. It's arguable that the company doesn't really have a marketing plan it's comfortable enough to stick with for more than a quarter, and even with big spending plans, may now not have the creative or design help it needs.
As was the case with Mondelez, this is a story that's due for some fresh analyst perspective -- sooner rather than later.