Consumer Products: A Tale of Two markets
The home goods portion of the consumer products industry is growing. Not so with apparel.
.jpg;width=70;height=70;mode=crop;format=webp)
According to the Federal Reserve, nearly 70% of all U.S. economic activity is generated by consumer spending. Total consumer spending grew 2.8% during the 2018 calendar year. This is nearly identical to the latest reading of 2018 U.S. GDP growth of 2.85%.
Gardner Intelligence’s analysis of Wall Street data for the consumer products sector can be generally classified under two industries: apparel and “home goods”—home furnishings, fixtures and household products. Financial trends within these two industries over the last three years illustrate very different histories. The aggregated financial data provided by firms in the home goods industries suggests that this segment will be increasing capital expenditures after experiencing an increase in free cash flow. Conversely, the apparel industry’s free cash flow position, in general, does not suggest those firms will be making capital investments in the near future.
In the 2019 and 2020 consensus forecast of Wall Street equities analysts, apparel earnings before taxes, interests, depreciation and amortization (EBITDA) growth is projected to slow from its near 30% peak in the third quarter of 2018, dipping to 11.5% at the end of 2019 and then contracting 3.3% at year-end 2020. This comes after EBITDA experienced a multi-year contraction that only ended in mid-2017. The forecast for EBITDA in 2020 in inflation-adjusted dollars is expected to match the levels last experienced in 2013.
By comparison, the home goods industry, after experiencing flat to declining profits in 2018, is expected to change course and experience profit growth of 8.5% and 4.1% at the end of 2019 and 2020 respectively. Should these forecasts come true, processors producing for the home goods industry may be in for a welcome increase in customer activity over the next 18 to 24 months.
ABOUT THE AUTHOR Michael Guckes is chief economist for Gardner Intelligence, a division of Gardner Business Media, Cincinnati. He has performed economic analysis, modeling, and forecasting work for more than 20 years among a wide range of industries. He received his BA in political science and economics from Kenyon College and his MBA from Ohio State University. Contact: (513) 527-8800; mguckes@gardnerweb.com. Learn more about the plastics processing Index at gardnerintelligence.com.
Related Content
-
Medical Tubing: Use Simulation to Troubleshoot, Optimize Processing & Dies
Extrusion simulations can be useful in anticipating issues and running “what-if” scenarios to size extruders and design dies for extrusion projects. It should be used at early stages of any project to avoid trial and error and remaking tooling.
-
Impacts of Auto’s Switch to Sustainability
Of all the trends you can see at NPE2024, this one is BIG. Not only is the auto industry transitioning to electrification but there are concerted efforts to modify the materials used, especially polymers, for interior applications.
-
In Sustainable Packaging, the Word is ‘Monomaterial’
In both flexible and rigid packaging, the trend is to replace multimaterial laminates, coextrusions and “composites” with single-material structures, usually based on PE or PP. Nonpackaging applications are following suit.
