Large retailers like Wal-Mart
Walmart had already lost customers to dollar stores in the recent economic recession, so Walmart hopes that lowering its prices could bring that market share back. Since consumers are struggling with the increase in fuel prices, Walmart wants to be able to offer their goods at a price that nobody else can, according to Reuters.
"I think we reached the wall in terms of raising price. Consumers can't take any more," said Jack Russo, analyst at Edward Jones. This limit of what consumers are willing to pay puts a restriction on the margins Walmart is able to make, so the suppliers will have to innovate and take advantage of rare cost breaks to deliver products that customers are willing to pay for.
Business section: Investing ideas
We started this screen with consumer goods companies located in the U.S., and then we compared their profitability to their respective industries to find those with higher gross, operating, and pre-tax margins than their industry peers.
The list below contains the top names from that list. Do you think these companies can beat the margin push?
List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)
1. Coca-Cola
2. Philip Morris International
3. Colgate-Palmolive: Together with its subsidiaries, manufactures and markets consumer products worldwide. Market cap at $44.77B. TTM gross margin at 60.09% vs. industry average at 51.82%. TTM operating margin at 23.22% vs. industry average at 18.5%. TTM pre-tax margin at 22.64% vs. industry average at 16.5%
4. General Mills: Manufactures and markets branded consumer foods worldwide. Market cap at $24.88B. TTM gross margin at 40.26% vs. industry average at 31.82%. TTM operating margin at 16.1% vs. industry average at 11.52%. TTM pre-tax margin at 14.55% vs. industry average at 9.07%
5. Estee Lauder: Engages in the manufacture, marketing, and sale of skin care, makeup, fragrance, and hair care products worldwide. Market cap at $22.82B. TTM gross margin at 82.13% vs. industry average at 71.26%. TTM operating margin at 14.73% vs. industry average at 13.25%. TTM pre-tax margin at 13.2% vs. industry average at 10.59%
6. Coach
7. Kellogg
8. HJ Heinz: Manufactures and markets food products for consumers, and foodservice and institutional customers in North America, Europe, the Asia Pacific, and internationally. Market cap at $16.98B. TTM gross margin at 38.75% vs. industry average at 31.82%. TTM operating margin at 14.45% vs. industry average at 11.52%. TTM pre-tax margin at 11.09% vs. industry average at 9.07%
9. Hershey: Engages in manufacturing, marketing, selling, and distributing various chocolate and confectionery products, pantry items, and gum and mint refreshment products worldwide. Market cap at $13.74B. TTM gross margin at 45.93% vs. industry average at 31.82%. TTM operating margin at 17.88% vs. industry average at 11.52%.TTM pre-tax margin at 15.83% vs. industry average at 9.07%
10. Mattel: Engages in the design, manufacture, and marketing of various toy products worldwide. Market cap at $11.20B. TTM gross margin at 52.56% vs. industry average at 43.5%. TTM operating margin at 16.97% vs. industry average at 12.43%. TTM pre-tax margin at 15.49% vs. industry average at 10.52%
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Daniel Guttridge does not own any of the shares mentioned above.