When it seems like everyone is being affected by the global economic meltdown, there are a few sectors, and exchange traded funds (ETFs) that track these sectors, that seem to be immune from having to slash prices to attract consumers.
In a time of a recession and depressed consumer spending, the most common thing businesses do is cut prices, and most are doing this. However, when dealing with pricing of a product, one must be mindful of the immediate effects it will have on the company and the long-term effect it will have on competitiveness and product branding, states Geoff Colvin of Fortune.
Some companies are defying the price-slashing trend, and are either maintaining or even raising their prices. For example, Colgate-Palmolive (CL) is sustaining their prices and McDonald’s (MCD) is actually raising their prices.
Despite the hike, McDonald’s still seems to be doing relatively well. On Monday, though, the nation’s number one hamburger chain warned that the dollar could hurt its profits during the first quarter, says Lauren Shepherd for the Associated Press. But the company’s CEO is still confident in its fundamental strength
One may ponder how could these companies do this and still keep their heads above water in such times? The answer is actually pretty simple. In the case of Colgate, they offer products that are specialized and a necessity, such as toothpaste, something we hope no one is skimping on. There aren’t many, if any, substitutes for toothpaste and we all need it.
As for McDonald’s, despite higher prices, the restaurant is still a great value. Additionally, MCD is seeing a surge in demand owing to the economic conditions which are forcing many consumers to opt for cheaper alternative options for food. In a nutshell, both these companies offer consumer staples that we just can’t live without.
If you want to grab exposure to these companies and the consumer staples sector, take a look at:
- Consumer Staples Select SPDR (XLP): down 17.7% year to date; CL is 3.9%
- Vanguard Consumer Staples (VDC): which is down 17.6% year to date; CL is 3.3%
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.