2 TSX Consumer Stocks, Maple Leaf and Metro, That Investors Are Exploring This Summer

Summary

• Consumer staples are non-cyclical in nature and hence considered a safe investor’s bet
• Consumer Staples Index has continued to perform well in the pandemic scenario and has advanced by 2.34 per cent in 2020.
• Two hot consumer staple stock for this summer: Maple Leaf and Metro

The Coronavirus pandemic-induced lockdown has triggered an economic recession, stock market crashes, and rate of unemployment – a situation that has no immediate end in sight.

Irrespective of where the economy rolls, human beings need essential items to survive. Which is why consumer staples will always be a key part of the world economy.

The sector consists of companies producing everyday essential items such as food and beverages, household goods, hygiene products, etc. The companies are seen as non-cyclical since people cannot eliminate the items from their daily lives irrespective of dwindling budgets.

Thanks to its reliability, consumer staples stocks are always an attractive for the investors.

The S&P/TSX Capped Consumer Staples Index, constituting of 11 stocks, has advanced by 6.4 per cent in 2020. The index has posted nearly 34 per cent gains over a five-year period and has a current market capitalization of US $ 98.85 billion. While most other sectors are reeling under the pandemic’s impact, consumer staples and discretionary have posted year-to-date gains.

Let’s take a look at two hot consumer staple stocks on the Toronto Stock Exchange:

Maple Leaf (TSX:MFI)

Top Canadian food processor Maple Leaf made headlines after offering to pay cash bonuses to factory employees amid threat of production disruptions during the coronavirus crisis. In an official statement, consumer protein company stated will be paying an addition C$ 80 per week along with their regular and overtime pay.

While the action called into question the company’s policies, the baseline explanation was simple: demand for meat has spiked as shoppers stock up food amid pandemic.

As demand for meat, pasta, and flour soars across North America since the outbreak, Maple Leaf’s stock has gained over 17 per cent in 2020. The scrips touched a yearly high of C$ 30.62 on June 20.

Maple Leaf’s long-term plans came to the spotlight with the acquisition of Lightlife Foods, a company producing plant-based protein alternatives for meat. The company’s foray into the meat-substitute industry – a trend many predict will blow up in the future – has paid off well so far.

Multiple researches predict that global warming and future imposition of environment-linked taxes to cut down meat demand will impact major meat companies in the long run. According to a BIS Research report, the plant-based food and beverage alternatives industry will grow at a CAGR of 13.82 per cent from 2019 to 2024 and US$ 80 billion by 2024.

Maple Leaf’s forward-looking acquisition and promises to investors of additional investment in this area is an encouraging and environmentally- responsible statement.

In its Q1 2020 results, the firm posted an overall sales growth of 12.8 per cent and Adjusted EBITDA margin of 8.9 per cent of sales. Its meat protein segment posted sales growth of 12.7 per cent while the plant protein group reported sales growth of 25.9 per cent.

The company continues to evolve in the face of pandemic and posted a strong Q1 balance sheet. It currently employs nearly 12,000 people. Here’s a quick look at its current stats:

Metro (TSX:MRU)

Metro, one of the largest retailers in Canada, has footprints in food and pharmacy business. The scrip has advanced by 13 per cent in 2020 and posted gains of over 286 per cent in a decade.

Like other consumer staples, demand for Metro’s products has been mostly stable, even during the pandemic-led market crash in March this year.

In the second quarter, Metro posted net earnings of $ 176.2 million, up 45 per cent from corresponding quarter of 2019. Its overall sales touched $ 3,988.9 million, up 7.8 per cent from Q2, 2019. Metro’s top line also advanced by about 8 per cent. It announced a quarterly dividend of $ 0.225 per share, up by 12.5 per cent for the same quarter last year.

The company recently acquired Canadian drugstore chain Jean Coutu, adding 650 pharmacies to its network of 950 food and grocery stores. It employs almost 90,000 people.

Unlike other grocery chains, Metro stores operates on lease model, allowing it to expand quickly and spend less capital.