7 Defensive Consumer Staples Stocks to Buy in a Falling Market (2024)

Consumers tend to buy certain items regardless of economic conditions. These basic goods are essentially necessities, thus we refer to them as staple goods, or simply staples. They include food, beverages, personal hygiene products, household goods, and tobacco and alcohol.Since consumers buy these products regardless of economic cycles, consumer staple stocks perform in falling markets as well as rising markets.

That said, they tend to perform better than discretionary goods stocks in falling markets, but worse than discretionary goods stocks in rising markets.

The market has gone up and down in 2022. The Dow Jones Industrial Average is down more than 4% in that period, having slightly rebounded to begin February after sharply falling in January. That is causing some defensive behavior within the markets. That makes consumer staples, as defensive stocks, a group worth following.

We know that inflation numbers are worrisome. That should logically lead to weaker markets and stronger positions for consumer staple stocks. It won’t be as simple as that, though. We know supply chains remain disrupted. Other factors could hurt the sector as well.

But overall, that‘s why the group of stocks listed below have the right mix of factors to move upward in the coming weeks and months.

• Costco (NASDAQ:COST)
• BJ’s Wholesale Club (NYSE:BJ)
• Walmart (NYSE:WMT)
• Diageo (NYSE:DEO)
• Celsius Holdings (NASDAQ:CELH)
• PepsiCo (NASDAQ:PEP)
• Procter & Gamble (NYSE:PG)

Consumer Staples Stocks: Costco (COST)

Costco is one of the most obvious stocks that comes to mind when thinking about staple goods and falling markets. Its business model is built on selling consumer goods in bulk. Few business models are better suited to our current economic environment.

People require staple goods at all times, Costco sells them in bulk, making the unit price cheaper. Want to hedge against rising grocery costs? Where do you go? The answer is often Costco.

Indeed, Costco has performed very well recently. The company reported $22.24 billion in net revenue in the month of December. That was a significantly higher figure than the $19.14 billion it reported in the same period a year earlier.

And it wasn’t simply a strong December. It was a very strong quarter leading into December. During the 18 week period leading up to the release of that report, Costco recorded $76.34 billion in net sales, up from $65.47 billion a year prior.

It seems that consumers had warmed to Costco’s business even prior to the recent inflation news that has triggered rising concerns.

BJ’s Wholesale Club (BJ)

BJ’s wholesale Club is smaller than the previous company listed in this article, Costco. It is the more regional of the two, catering to consumers primarily on the east coast of the U.S.

But BJ’s claim is the same: It consistently offers a 25% or greater discount on a representative basket of manufacturer-branded groceries compared to traditional supermarkets.

So, the logic for considering investing in BJ’s is similar. When we compare the metrics underpinning BJ’s, we see much of the same: Strong growth in uncertain times. The company’s third-quarter fiscal results, released in mid-November, show as much.

Sales increased 13.1% on a year-over-year basis, and 27.2% over the past two years. Its gasoline sales increased 24.2% over that period as well. And the company seems to be making strong progress in its bid to strengthen its ecommerce business. Digital sales grew 44% in Q3 alone.

The company also initiated a share repurchase program when Q3 earnings were released. It provides for the company to repurchase up to $500 million worth of shares through January 2025. All of these factors should keep BJ stock relatively healthy.

Consumer Staples Stocks: Walmart (WMT)

Consumers are becoming increasingly cost-conscious. Walmart is nearly synonymous with cost-conscious buyer behavior. It’s also the world’s largest retailer and boasts the greatest revenues of any company in the world.

Walmart is essentially growing in most ways imaginable. It operates in every state in the U.S. and 24 countries internationally. It seems investors really began to worry about inflation and the economy after the Federal Reserve released December inflation figures in January.

My guess is that Walmart’s numbers will improve because of that. Walmart released earnings in November which were strong. But I’d assert that upcoming numbers will be stronger because defensive behavior will rise on the part of consumers.

Those November numbers were strong. Q3 sales increased by 9.2% and were up 15.6% over the preceding two years. Ecommerce sales took off in 2020 and are up 87% since then. It wasn’t all good, though. International sales dropped 20.1%. However, wholesale revenue, from Sam’s Club, increased by 13.9% on a year-over-year basis. Sam’s Club could provide an extra boost to the company’s overall performance in the coming quarters for the same reasons Costco and BJ’s remain attractive.

Diageo (DEO)

Diageo is the parent company of many of the most ubiquitous alcohol brands. These include Johnnie Walker, Ketel One, Captain Morgan’s, Tanqueray, and Guinness to name a few. People tend to purchase and drink more alcohol during tough economic periods. So, the catalyst for DEO stock is fairly clear.

That has DEO stock worth considering. It’s a strong company with strong tailwinds. The company reported GBP 8 billion in revenue to end the second half of 2021. That led to GBP 2.7 billion in operating profits.

However, Diageo is in a bit of a bind. On the one hand, it recognized growth in tequila sales of 61% in the latter half of 2021. Its Don Julio tequila brand performed particularly well. However, tequila production is time intensive, requiring months or years of aging before it is ready to sell. High demand during the pandemic has depleted stocks.

So the question is how Diageo will balance the issue. It can raise prices to slow stock depletion. That could work. Or perhaps it finds a work around and replenishes inventory. It makes DEO stock intriguing in terms of price dynamics.

Consumer Staples Stocks: Celsius Holdings (CELH)

Before explaining Celsius Holdings’ business model, it’s important to know one thing: Analysts assume there’s a ton of upside priced into CELH stock. They’ve given it an average consensus target price of $110. It currently trades near $52.

The company sells sugar-free beverages marketed toward fitness-conscious consumers(1). They contain everything from caffeine, to BCAAs (branched-chain amino acid), to metabolism boosting supplements in both carbonated and non-carbonated drinks.

The reason investors should take notice is that Celsius Holdings is booming. At the end of Q3 ‘20 the firm recorded $36.8 million in revenues. A year later and that figure had risen to $94.9 million. That’s a growth rate of 157.6% over that period.

And that growth is primarily coming from North American markets which accounted for $84.5 million of that total $94.9 million of revenue.That growth is predicted to continue with consensus expectations that it will reach $491 million in 2022 revenues. It is expected that the company will hit approximately $302 million in 2021 revenues.

Celsius Holdings consumers are likely to splurge on its beverages whatever the economic climate, making it a solid choice.

PepsiCo (PEP)

PepsiCo was already a stock to watch out for before the market took a turn to begin 2022. Revenues grew by 11.6% in Q3 and 13.2% YTD.

Those results filtered through to particularly strong EPS numbers, with CEO Ramon Laguarta noting:

“We are pleased with our results for the third quarter as we delivered very strong net revenue growth while carefully navigating a dynamic and volatile supply chain and cost environment. Given our year-to-date performance, we now expect our full-year organic revenue to increase approximately 8 percent and core constant currency earnings per share to increase at least 11 Percent.”

The company has handled supply chain issues well. That is reflected in share prices which have increased from $140 to $175 over the past year. The company also pays a rock-solid $1.07 dividend that hasn’t been reduced since 1973. That’s another strong point of attraction in defensive times.

Consumer Staples Stocks: Procter & Gamble (PG)

Procter & Gamble released strong earnings on Jan. 19. The company outperformed expectations posting $21 billion in revenues and earnings per share of $1.66. Analysts had expected the consumer packaged goods giant to post $20.34 billions revenues and $1.65 EPS.

The company itself is predicting that rising consumer prices will continue to go up in 2022. It also expects that those continued rising prices will positively affect its share prices. The company expects higher profitability and increasing margins even in the face of rising rising prices and supply chain woes.

Procter & Gamble believes that consumer demand in clean home, health & hygiene sectors will protect it against broader economic issues.That held true in the last quarter, and PG stock is always a rock-solid choice in the consumer defensive sector.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Alex Sirois is a freelance contributor toInvestorPlacewhose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.