1. UK Consumer Goods Industry Landscape

The consumer goods sector included a list of companies that sold items and services to individuals and households. Food and drinks, household, personal care, wholesale distribution, and agriculture are also important aspects of the industry. Furthermore, the Consumer Goods sector can be divided into two categories: durables and non-durables, with the entire sector divided into many sectors. The consumer products business is being fueled by technological innovation.

According to available data from the Office for National Statistics (“ONS”), Retail sales dropped 3.7% in December 2021 but were still 2.6% higher than pre-coronavirus (COVID-19) February 2020 levels. In addition, the percentage of retail transactions made online increased slightly from 26.3% in November 2021 to 26.6% in December 2021, a significant increase from 19.7% in February 2020 before the coronavirus epidemic.

Growth catalysts in the Consumer Goods Sector

Risk Exposures to the Consumer Goods Sector

• Product Boycotts: The product boycotts might lead to a drop in sales; many retailers still fear them.
• Cybersecurity Risk: Following the Covid-19 outbreak, there has been a boost in online sales activity, as well as an increase in e-commerce offences. Furthermore, cybercriminals looked for new ways to target online retailers.
• Customer Loyalty & Brand: Customers are always looking for the most outstanding deal on their favorite brands. Repeat consumers and a loyal customer base are critical for a small store's long-term success.

SWOT Analysis

Benchmark Index Performance

Based on the last one-year performance, the FTSE All-Share Consumer Staples index has slightly underperformed the FTSE 100 index but outperformed the FTSE 250 index. Furthermore, the FTSE All-Share Consumer Staples index generated a return of about 15.69%; however, the FTSE 100 generated a return of around 16.27%, and the FTSE 250 index produced a return of about 4.25%

Figure 1: One Year Benchmark Index Performance

(Source: Refinitiv; Analysis done by Kalkine Group)

Consumer Goods Sector Outlook

The Consumer Products industry has kickstarted 2022 on a positive note. The rising disposable income because of accelerated economic growth has supported the spending on consumer goods products. Furthermore, the increasing number of middle-class consumers and growing brand awareness among them have been fueling up the industry for food and grocery retail in developing countries, including India and China. Meanwhile, the boom in online sales and optimism around accelerated economic recovery in the UK would further boost the consumer goods industry. Overall, the growth of emerging markets would continue to outstrip that of the developed markets by a wide margin.

2. Investment analysis and stocks under discussion (DOCS, CBOX, and TATE)

After gaining insights into the Consumer Goods sector, we would look at the business model of three Consumer Goods players listed on the London Stock Exchange.

A. Dr. Martens PLC (LON: DOCS)

(Recommendation: Buy, Potential Upside: 13.38%, Market Capitalization: GBP 2.87 billion)

Dr. Martens PLC (LON: DOCS) is an FTSE 250 listed UK-based leading footwear brand. The Company has a diverse range of product categories such as Originals, Fusion, Kids, Casual and Accessories.

DOCS had paid an interim dividend of 1.22 pence per share on 04 February 2022, while the ex-dividend date was 13 January 2022.

 One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

From a technical standpoint, the stock price is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price. Moreover, the 14-days RSI of ~30.41 confirms an oversold position.

Valuation Methodology

Our illustrative valuation model suggests that the stock has an upside potential of 13.38% over the closing price of GBX 281.60 (as of 08 February 2022).

B. Cake Box Holdings PLC (LON: CBOX)

(Recommendation: Speculative Buy, Potential Upside: 10.76%, Market Capitalization: GBP 89.17 million)

Cake Box Holdings PLC (LON: CBOX) is an FTSE AIM All-Share-listed UK-based franchise retailer and manufacturer of cakes. Further, the retail stores are operated under the brand Egg-free Cake Box.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group) 

From a technical standpoint, the stock price is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price. Moreover, the 14-days RSI of ~19.16 indicates an oversold position.

Valuation Methodology

Our illustrative valuation model suggests that the stock has an upside potential of 10.76% over the closing price of GBX 223.00 (as of 08 February 2022).

C. Tate & Lyle PLC (LON: TATE)

(Recommendation: Hold, Potential Upside: 16.05%, Market Capitalization: GBP 3.35 billion)

Tate & Lyle PLC (LON: TATE) is an FTSE 250 index listed Company, the global provider of food and beverage ingredients and solutions.

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group)  

From a technical standpoint, the stock price is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price.

Valuation Methodology

Our illustrative valuation model suggests that the stock has an upside potential of 16.05% over the closing price of GBX 714.80 (as on 08 February 2022).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

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