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In our last issue, we reflected upon the contradictions present in the experience of ZRG Consumer 100 firms. On the one hand, we observed that revenue and profit growth continued a deceleration that began in 2018. On the other, we saw many C100 firms increasing or reaffirming their dividends, and the equity analyst community remaining bullish on a profit recovery. In this issue, we see a continued dichotomy between superior stock market returns for the ZRG Consumer 100 index and a massive drop in profitability in Q2—down almost 80% from its Q4 2019 level. However, there is reason for optimism as the trough was not as deep as had been expected and now a fast profitability rebound is expected for both Q3 and Q4.


The ZRG Consumer 100 finished August up 27.08% for the year. This substantially outpaced not only the S&P 500 (8.34% YTD), but the Consumer Discretionary Select Sector SPDR Fund (XLY) which returned 9.23% and the Consumer Staples Select Sector SPDR FUND (XLP) which returned –0.35%. Equally impressive, Consumer 100 firms outperformed the S&P 500 meaningfully during the March market low. This resilience likely reflects an overall flight to quality as the ZRG Consumer 100 is comprised of the Consumer industry’s leading brands and most innovative companies globally.


When 2020 began, equity analysts following ZRG Consumer 100 firms had a bullish view of earnings, expecting profits to rise steadily following a dip in the seasonally weak Q1. Of course, the coronavirus changed everything, and the impact was dramatic.

On January 1st, analysts anticipated a Q1 2020 earnings to drop by approximately 20% sequentially from Q4 2019. By March 1st, analysts had reduced their forecasts and then expected a 30% sequential Q1 drop. Only 30 days later, the quarter finished and when ZRG C100 companies reported their results, the world found out that they actually had experienced a 60% drop in earnings from Q4 levels.

Q2 is now expected to represent the earnings nadir for the ZRG C100. However, the bounce back in Q3 is still shaping up as a 40% drop from Q4 2019 earnings levels—decidedly not the 20% increase that analysts forecasted back in the “heady days" of January of this year.

There is one silver lining in all of this: it appears that the Q2 earnings decline was not as deep as had been expected as recently as June 1st. Furthermore, a substantial bounce back is now anticipated in both Q3 and Q4. That said, ZRG C100 earnings for Q4 2020 are still expected to be down almost 20% from what they had been a year before.


A contributing factor to the improved performance of the ZRG C100 index is a notable shift in the tone of the news flow generated by its constituent firms. We analyzed the details of announcements made by ZRG C100 firms that typically represent a "red flag" for a business (such as halting operations, announcing impairments, discontinuing operations, etc.). We characterized these as negative (-1), neutral (0), or positive (+1 - a situation when the "red flag" condition was being removed); summing these numbers by month allows us to trace out the severity of the pandemic shock to the ZRG C100 community.

A quick review of the chart shows what happened: March was filled with announcements of stores closed and operations halted. The negative flow continued into April with more of the same. However, May and June represented a distinct change in the tenor of the C100 experience: whether it was Pernod Ricard announcing the reopening of bars and restaurants in France, Signet Jewelers reopening nearly 1,100 stores, or Carnival announcing plans for a limited restart of cruises in August, optimism pervaded the news. July and August have been marginally less positive, with impairments/write-offs featuring more prominently. That said, the measured tenor of these announcements as the coronavirus crisis continues is different from the shock of unprecedented closures and operational suspensions that filled the news in March and April.


In the Food & Beverage sector, Coca-Cola Company appoints Bradley Gayton as SVP & General Counsel after nearly 30 years at Ford Motor Company; Constellation Brands appointed Kate Voyten, formerly of Hertz and P&G, to its newly created role of SVP, Brand Management for the company's wine and spirits portfolio. Medifast appointed James (Jim) Maloney as Chief Financial Officer, formerly SVP & CFO L.B. Foster Company. B&G Foods has elected Debra Martin Chase to the Board of Directors and also established a Board-level Corporate Social Responsibility (CSR) Committee, which Ms. Chase will chair. C&C Group plc named David Forde the Group Chief Executive Officer. Mr. Forde joins C&C from Heineken. Post Holdings, Inc. announced that Dorothy M. Burwell, Partner at The Finsbury Group, has been appointed to its Board of Directors.

In Travel, Hospitality & Leisure, Norwegian Cruise Line Holdings announced the appointment of Scott Dahnke, Global co-Chief Executive Officer of L Catterton to its Board of Directors. Dunkin' Brands Group announced Philip Auerbach will join the company in the newly created role of Chief Digital and Strategy Officer; Auerbach joins Dunkin' Brands from Lindblad Expeditions, the global leader in ship-based expedition travel, where he most recently served as Chief Commercial Officer. Chipotle Mexican Grill elected Mary A. Winston and Gregg L. Engles to its Board of Directors. Ms. Winston is board director of Bed, Bath & Beyond, Acuity Brands, Domtar Corp and Dover Corp and former EVP & CFO of Family Dollar. Mr. Engles is former Chair & CEO of WhiteWave Foods prior to its acquisition by Danone. Cracker Barrel Old Country Store® elected Gilbert Dávila, former VP, Global Diversity at The Walt Disney Company, to the company's Board of Directors. InterContinental Hotels Group announced that Wayne Hoare, formerly of RCL Foods, has joined as Chief Human Resources Officer (CHRO). Bloomin’ Brands announced the addition of John P. Gainor, Jr. and Lawrence V. Jackson to the Board of Directors. Gainor former President CEO of International Dairy Queen and current Board Director of Jack in the Box. Jackson prior President and CEO of Global Procurement and EVP & Chief People Officer at Walmart.

In Consumer Goods, Mattel, Inc. appoints Diana S. Ferguson, CFO of Cleveland Avenue LLC, to the Company’s Board of Directors and as Chair of the Audit Committee. Fossil Group brought Marc Rey, President and CEO of Shiseido Americas and Chief Growth Officer of Shiseido Group, onto its Board of Directors. HUGO BOSS AG has appointed Oliver Timm as Chief Sales Officer (CSO). Timm held various senior executive positions at PVH. Coty Inc. appointed Sue Y. Nabi as Chief Executive Officer, Nabi is the founder and CEO of the new-age luxury skincare line, Orveda, and previously served as Worldwide President of both L’Oréal, and Lancôme.

In Retail and eCommerce, Big Lots. brings Jack Pestello aboard as EVP & Chief Merchandising Officer. Mr. Pestello joins Big Lots following seven years in leadership roles at Walmart and with over 25 years of global retail experience spanning merchandising, sourcing, category and brand development. DICK'S Sporting Goods has added Larry Fitzgerald, Jr., the 11-time Pro Bowl wide receiver for the NFL's Arizona Cardinals, to the company's Board of Directors. Bed Bath & Beyond announced the appointment of Neil Lick, formerly of Williams-Sonoma, as SVP, Owned Brands. Pets at Home Group brought Karen Whitworth onto the Board of Directors and Chair of the Audit & Risk Committee. The ODP Corporation appointed Terry Leeper as EVP & Chief Technology Officer (CTO). Leeper previously held executive positions at Amazon and Microsoft. GameStop announced Diana Saadeh-Jajeh, formerly of JUUL Labs, as SVP & Chief Accounting Officer. The Vitamin Shoppe appointed Laura Coffey as CFO after 23-years at Pier 1 Imports. Michael Diamond, formerly CFO at Pizza Hut US, has been named CFO at Michaels.


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