Consumer goods companies have witnessed strong demand in the second quarter of 2021 owing to rising discretionary spending driven by stimulus checks and an improving job market. According to a McKinsey & Company report, pent-up demand and spending on discretionary drove spending to a 20% – 30% year-over-year increase  in the second quarter.

While concerns over a slowdown in economic growth due to the resurgence of COVID-19 cases, and rising inflation is expected to keep the market volatile in the near term, many consumer goods stocks are well-positioned to dodge any short-term fluctuations based on their ability to capitalize on the pent-up demand for discretionary goods.

Robust digital infrastructure and impressive product launches should allow consumer goods companies Volkswagen AG (VWAGY), Adidas AG (ADDYY), Lands’ End, Inc. (LE), and Citi Trends, Inc. (CTRN) to generate  rising sales in the coming months. Therefore, Wall Street analysts expect their stocks to rally by more than 60% in the coming months.

Volkswagen AG (VWAGY)

Owned by Porsche Automobil Holding SE (POAHY), VWAGY is a Germany-based automobile company that offers passenger cars, commercial vehicles, power engineering, and financial services worldwide. The company  also develops vehicles and components for the group’s brands  and also offers motorcycles.

In an announcement dated August 6, VWAGY said it will introduce the new ID.5 GTX all-electric powered SUV coupé on September 7, 2021, at the IAA Munich Motor Show. Based on the Modular Electric Drive Matrix (MEB), this fully connected SUV coupé fitted with Car2X technology possesses powerful dual engine four-wheel drive and will be the second model from the sporty GTX product brand. VWAGY hopes to increase its  share of all-electric cars in Europe to 70% of its unit sales by 2030.

To strengthen its expertise in the integration of automotive software as part of its ACCELERATE strategy, on July 30, 2021, VWAGY established a joint venture with TraceTronic, a leading developer of high-quality software solutions for future vehicles, under the name neocx, that will construct a continuous integration/continuous testing (CI/CT) factory. VWAGY is looking forward to growing its automotive software integration and the digital customer experience as core competencies.

VWAGY’s sales revenue for its fiscal second quarter, ended June 30, 2021, increased 63.8% year-over-year to €67.29 billion ($78.86 billion). The company’s gross profit increased year-over-year to €12.52 billion ($14.67 billion). Its operating profit has been reported at €6.55 billion ($7.76 billion), compared to a €2.39 billion ($2.84 billion) loss in the prior-year period. VWAGY’s net earnings came in at €5.04 billion ($5.98 billion), versus a €1.54 billion ($1.82 billion) loss in the year-ago period. VWAGY’s EPS has been reported at €9.70, versus  a €3.23 loss per share in the prior-year period. The company had €40.86 billion ($48.01 billion) in cash and cash equivalents as of June 30, 2021.

A $6.28 consensus EPS estimate  for the current fiscal year represents a 212.8% improvement year-over-year. VWAGY surpassed consensus EPS estimates in three of the trailing four quarters. The $294.19 billion consensus revenue estimate for the current fiscal year represents a 9.3% gain from the prior-year period.

The stock has gained 85.2% over the past year and 42.8% over the past six months. It closed yesterday’s trading session at $32.73. The only Wall Street analyst providing a rating for the stock rated it Buy. The $54 average price target represents a potential 65% upside.

VWAGY’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

The stock also has a B grade for Value. Click here to see the additional ratings for VWAGY (Sentiment, Quality, Stability, Growth, and Momentum). 

VWAGY is ranked #5 of 62 stocks in the Auto & Vehicle Manufacturers industry. 

Click here to check out our Automotive Industry Report for 2021

Adidas AG (ADDYY)

Based in Germany, ADDYY designs, develops, produces, and markets various athletic and sports lifestyle products worldwide. The company offers footwear, apparel, accessories and gear, and golf products under the Adidas and Reebok brands. It sells its products through company-owned retail stores, mono-branded franchise stores, wholesale distribution, and e-commerce channels.

On June 16, 2021, ADDYY launched TechFit Period Proof tights, which feature an absorbent layer designed to prevent leaks when using a tampon or pad. Because the company now focuses more on its female consumers, this product will likely generate good sales and expand its market reach in the coming months.

For its fiscal second quarter, ended June 30, 2021, ADDYY’s net sales increased 51.5% year-over-year to €5.08 billion ($5.96 billion). The company’s gross profit has been reported at €2.63 billion ($3.09 billion), representing a 53% year-over-year improvement. Its operating profit came in at €543 million ($637.72 million), compared to a €263 million ($308.88 million) loss in the prior-year period. Its net income has been reported at €407 million ($478 million), versus a €317 million ($372.30 million) loss in the year-ago period. ADDYY’s EPS came in at €2.03 ($2.39), compared to a loss of €1.51 ($1.77) in the prior-year period. As of June 30, 2021, the company had €4.15 billion ($4.88 billion) in cash and cash equivalents.

Analysts expect ADDYY’s EPS to increase 277.8% year-over-year for its current fiscal year to $4.83. ADDYY surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect its revenue to be $25.66 billion for the current fiscal year, representing an 8.7% rise year-over-year. Its EPS is expected to grow at a 26.4% rate per annum over the next five years.

The stock has gained 18.5% in price over the past year and 2.1% over the past month. It ended yesterday’s trading session at $180.77. Wall Street analysts expect the stock to hit $371.02 in the near term, which indicates a potential 105.2% upside. Two Wall Street analysts rating the stock have rated it Buy.

ADDYY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock has an A grade for Momentum, and a B grade for Quality. Click here to see the additional ratings for ADDYY (Growth, Stability, Value, and Sentiment). 

ADDYY is ranked #22 of 35 stocks in the A-rated Athletics & Recreation industry. 

Lands’ End, Inc. (LE)

LE is a uni-channel retailer of casual clothing, accessories, footwear, and home products worldwide. The Dodgeville, Wis., company sells its products online through its website and third-party online marketplaces, direct mail catalogs, and retail locations.

On June 03, 2021, LE chose Manhattan Associates Inc.’s (MANH) Manhattan Active Supply Chain solution to support LE’s Uni-Channel initiative to deliver a seamless, high-quality customer experience across its growing footprint. This, combined with LE’s investment in improving its technology infrastructure, should enable it to capitalize on the evolution in customer shopping habits.

On May 12, LE and Draper James, a classic American lifestyle brand, introduced a new women’s swimwear collection and unveiled plans to release home and sleepwear collections in Fall 2021. Both companies are looking forward to continuing this partnership by offering comfort and confidence through swimwear, sleepwear, and home collections that stand for size, inclusivity, effortless style, and contemporary design.

LE’s net sales were $321.30 million for its fiscal first quarter ended April 30, 2021, representing a 48.1% improvement year-over-year. The company’s gross profit increased 56.9% year-over-year to $147.74 million. Its operating income has been reported at $11.87 million for the quarter, versus a $24.71 million loss in the prior-year period. LE’s net income came in at $2.64 million, compared to a $20.64 million loss in the year-ago period. Its EPS has been reported at $0.08, versus a $0.64 loss per share in the prior-year period. As of April 30, 2021, LE had $36.18 million in cash and cash equivalents.

For its current fiscal year, analysts expect LE’s EPS to be $1.40, up 214.4% from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. A $1.69 billion consensus revenue estimate for the current fiscal year represents an 18.2% rise from the prior-year period. Analysts expect LE’s EPS to grow at a 20% rate per annum over the next five years.

LE has gained 215.5% in price over the past year and 54.3% over the past three months. It ended yesterday’s trading session at $36.47. The  $60  average price target represents a 64.5% potential upside. The only analyst rating the stock has rated it Buy.

It’s no surprise that LE has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Growth and Momentum, and a B grade for Sentiment. Click here to see the additional ratings for LE’s Value, Stability, and Quality.

Of the 64 stocks in the A-rated Fashion & Luxury industry, LE is ranked #16.

Citi Trends, Inc. (CTRN)

Savannah, Ga.-based CTRN operates as a value-priced retailer of fashion apparel, beauty products, and accessories for men, women, and kids, and provides home décor. The company sources its merchandise from approximately 1,700 vendors that consist of domestic manufacturers and importers. It provides its products primarily to African American and Latinx families in the United States.

On June 2, 2021, CTRN announced the authorization of a new $30 million share repurchase program. Based on its  better-than-expected first-quarter earnings and healthy balance sheet, the company expects to fund the share buyback from cash on hand and continue to generate strong cash flow.

For its fiscal second quarter, ended July 31, 2021, CTRN’s net sales increased 9.8% year-over-year to $237.28 million. The company had $76.75 million in cash and cash equivalents as of July 31, 2021.  

Analysts expect CTRN’s EPS to improve 107.8% year-over-year in the current year to $4.87. A $983.72 million consensus revenue estimate  for the current quarter represents a 25.6% rise from the prior-year period. Analysts expect the stock’s EPS to grow at a 24% rate per annum over the next five years.

CTRN has gained 327.5% in price over the past year and 140.5% over the past nine months. It ended yesterday’s trading session at $79.04. The only analyst providing a rating for the stock rated it Buy. The $150 average price target represents a potential 89.8% upside.

CTRN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock has an A grade for Value and Quality. We have also graded CTRN for Growth, Stability, Sentiment, and Momentum. Click here to access all CTRN’s ratings. 

Of the 64 stocks in the A-rated Fashion & Luxury industry, CTRN is ranked #38.

VWAGY shares were trading at $33.22 per share on Tuesday afternoon, up $0.49 (+1.48%). Year-to-date, VWAGY has gained 61.10%, versus a 20.56% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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