Equity Research 9 September 2019 FOCUS Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. This research report has been prepared in whole or in part by equity research analysts based outside the US who are not registered/qualified as research analysts with FINRA. PLEASE SEE ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 68. Restricted - Internal Global Consumer Staples ’19 Conference Recap: Prism for Optimism At our conference last week, p resenting companies took on a decidedly more optimistic tone than we have heard in several years. To be sure, fundamentals across the board still reflect considerable dispersion with recent performance pointing to a wide spectrum of progress towards a model of sustainable growth. But, companies that are farther along (if not already delivering high quality, high growth results) did not suggest any signs of retreat, while companies still in the midst of a turnaround suggested signs of progress below the surface -- expressing confidence that they are on the right course. Against this backdrop, and recognizing that the recent run-up in Staples stocks is as much reflective of the interest rate environment as of fundamental improvements, with no new concerns being raised last week, for now, we see little risk to valuation. A favorable macroeconomic backdrop surely plays a role, in our view. Indeed, barring some discrete events, we found commentary on both developed and developing market trends largely favorable. We were particularly struck by multinational CPG companies’ constructive dialogue around global market growth, particularly as it seems companies have historically used our conference as a forum to point out new watch points. Similarly, for companies with more limited geographic exposure the discussion was also broadly positive, in our view, with seemingly minimal concern expressed around a potential recession in the U.S., in particular. And, interestingly, when probed on tariffs and the China trade war, most companies didn’t seem overly concerned. That said, many of our covered companies also seem to be benefitting from and engaging in more constructive operating behavior vis a vis pricing, promotions and a more strategic as opposed to tactical focus on driving top and bottom-line growth. With regard to pricing, with increases now largely in the market, we would note that many companies continued to express that volume elasticities are falling in-line (if not better) than initially expected. What is key however, is that despite moderating commodity pressure, many...
