The COVID-19 pandemic, as it relates to the U.S. grocery sector, is entering its eighth month. Four months ago, in our coverage launch of the grocery sector, we laid out why the elevated level of spending for food at home would stay higher for longer. The novel coronavirus outbreak has had numerous impacts on the grocery industry, some of which will have long-lasting impacts on how we’ll eat and shop. Shopping behavior from the number of trips, to what brands we buy, to price elasticity, has been redefined overnight. It has also changed how we’ll eat. E-commerce penetration has been pushed forward for years. We will explore which trends will revert and which are more permanent and worth paying for. Consensus EPS estimates are still below our expectations, but they have been catching up.
We will update the trends we have seen in the last four months and outline where we see the sector moving in the coming months and quarters. We will also make several changes to our position monitor with grocers moving up, down, and across our list. As our macro team has shown, consumer staples stocks outperform in quad four, which they see in Q4. It likely won't be that simple for the grocers with headwinds and tailwinds to consider from rising labor costs, food inflation, difficult comparisons, higher unemployment, lack of progress on another stimulus, and the second wave of COVID-19 infections.
We could have another IPO in the grocery sector in the coming months, and we'll provide our thoughts and analysis. After all, 2020 may be the most profitable year for the grocers in a generation.
Please mark your calendars for our presentation and stay tuned for additional details.
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