Consumer Staples sector explained

How companies in this sector earn

How do Consumer Staples companies make money?

• Retailers pay suppliers for goods and sell them at a higher price, often keeping little of each sale.
• Warehouse clubs also charge shoppers a yearly membership fee, which adds income on top of product sales.
• Large retailers can also earn from advertising sold to brands and from services such as online marketplaces.
• Food, drink and household brands sell to retailers and rely on shoppers choosing their names again and again.
• The cost of the goods is usually the largest cost, followed by wages and running stores and warehouses.

Who regulates it

Food and Drug Administration (FDA), for the safety of most food, cosmetics and over-the-counter medicines · US Department of Agriculture (USDA), for meat, poultry and egg product inspection and the SNAP food benefits program · Federal Trade Commission (FTC), for competition and consumer protection · Consumer Product Safety Commission (CPSC), for the safety of household products

What moves results across the sector

• Prices of food and household goods, which affect what stores pay suppliers and what shoppers spend.
• Tariffs (taxes on imported goods), which can raise what retailers pay for products made abroad.
• Wages and the cost of shipping goods, which the companies describe in their quarterly reports.

Words you'll meet

Key terms

Comparable sales

The change in sales at stores open at least a year, as each company defines it.

Private label

Products sold under a retailer's own brand rather than a supplier's brand.

Membership fee

A yearly payment that gives a shopper the right to shop at a warehouse club or get member benefits.

Gross margin

The share of revenue left after the direct cost of the goods sold, before wages, rent and other costs.

Inventory

Goods a company has bought or made but not yet sold, which can tie up cash until they sell.

Shrink

Goods lost to theft, damage or errors, so they can never be sold.