Symbol: AENA.ES

The average market cap weighted performance of our global consumer universe was poor last week, down 0.6%. Weakness was particularly visible in Food and Cosmetic & Personal Care stocks due to a weak Q3 earnings season. We continue to be very selective in both industries as many names look weak.

·         The Food industry group continued to show signs of weakness. The group was down 2% last week and has gained only 6% over the past 26 weeks, largely underperforming our global consumer universe, due to a poor Q3 earnings season (e.g., HAIN, Unilever, and Nestle). Danone (BSN.FR) is the exception, with shares breaking out of a consolidation after the company released better-than-expected Q3 LFL sales due to a strong recovery in demand for infant milk formula and water products in China. Among our recommendations, Kerry Group (KYGA.IE) and Blue Buffalo are trading in a buy range.

o   HAIN (See Datagraph on page 6) was the worst performer of the week (-10%). Nielsen data indicated a 10th straight month of declines for Hain. An increasingly competitive environment with pricing pressure is likely to accelerate top-line declines in the short term. The 5% consensus revenue growth expectations (source: Thomson-Reuters) for 2018 seem aggressive. Shares of Hain crossed below their flat 200-DMA on increasing volume, a clear negative signal. Hain displays very poor fundamental and technical characteristics.

o   Unilever (UNIL.NL) (-7.7%) was hit by weak Q3 figures, with organic growth of 2.6% coming in below the 3.9% consensus expectation. The Company cited that the natural disasters in the U.S. and the poor weather in Europe had impacted it adversely. The stock has failed to clear a 91-day consolidationit has formed since June. Its A/D Rating, though improving, has been consistently negative since September 15. The next level of support is the 40-WMA.

o   Nestle (NESN.CH) reported Q3 organic LFL sales growth of 2.6% y/y, above consensus expectations of 2.5%. However, management expects similar growth rates for the rest of the year. Nestle had previously guided for 2017 organic growth in the lower half of the 2%-4% range. The latest statement implies a deceleration in organic growth for 2017 compared with last year’s 3.2% y/y growth. By geography, management cited that the U.S. was an area of weakness. The CHF 86 pivot point remains a clear resistance level. The stock lost 1.6% through the week.

·         We are seeing a similar trend among Cosmetics & Personal Care stocks. The group lost 2.2%, dragged down by weak Q3 growth reported by Reckitt Benckiser (RB.GB). The stock is on our vulnerable list. Focus List name Estee Lauder ( is trading constructively along its rising 10-WMA. Our other recommendation Pigeon (PIGC.JP) is down 7.8% since it was added to our Focus List, close to our stop-loss policy, but shares are finding resistance at the rising 40-WMA. We would like to see the stock form the right side of the 14-week consolidation base.

§  Reckitt Benckiser (RB.GB) reported a Q3 LFL decline of 1%, below consensus expectation of a 0.6% rise. For the full year, the Company now expects flat LFL sales, lower than the previous target of 2%. The Company has been faced with challenging business conditions this year and has failed to recover from the safety scandal at its South Korea business,  a failed product launch, and a cyber-attack. The stock had a failed breakout and its 10-WMA is trading below its 40-WMA, which is a sign of technical weakness.

The RS Rating of the Beverage Alcoholic industry group continued to rise significantly. The group was highlighted in our latest report, with several names breaking out (BUD, CPR.IT, and RCO.FR) of consolidations. Last week, shares of Pernod Ricard (RCD.FP), Carlsberg (CAB.DK), and CCU followed the same path.

·         Pernod Ricard (RCD.FR) – See Datagraph on page 7 – Pernod reported Q1 FY 2018 organic sales increase of 5.7% y/y, above analysts’ estimates for 3.4% growth. For FY 2018, it confirmed its profit from recurring operations growth guidance of 3%-5%, after recording a 3.3% growth last year. Its growth was boosted by healthy performance in all its regions, especially emerging markets, and growth in its strategic international brands. The stock is actionable after breaking out of a 17week consolidation.

*   Our Focus List name Remy Cointreau (RCO.FR) also reported strong sales figures for Q2 FY 2018. Remy Cointreau’s fundamental profile is among the best in the Beverages-Alcoholic industry group, with an EPS Rank of 99,  and an ROE of 16% in the most recent year. Remy reported 6.2% y/y organic sales growth (+3.2% y/y reported growth), with cognac sales growth (consisting of the Remy Martin brand, 69% of reported revenues this quarter) of 13.2% y/y (organic) for Q2 FY 2017 (three months ending September 2017). Remy Cointreau’s performance continues to be driven by cognac sales.

Last week we added Page industries (PI1.IN) to our Focus List. See Datagraph on page 8.

*   Page Industries (PI1.IN) is a manufacturer of innerwear, leisurewear, activewear, sleepwear, and swimwear for men, women, and children. The Company is an exclusive licensee of JOCKEY International Inc. (USA) in India, Sri Lanka, Bangladesh, Nepal, and the UAE; and also an exclusive licensee of Speedo International Ltd. in India. Shares are trading constructively within a pivot range. It made a 52-week high on September 18 after rising 3% on 2.5x average daily volume. The Company displays a strong fundamental profile with an EPS Rank of 88, and average three-year sales and EPS growth rate of 20% and 19%, respectively. Its sales and EPS recorded a CAGR of 24% from FY 2013 to FY 2017. Earnings growth has been very consistent during this period, as reflected by Page’s top notch stability factor of five. Its ROE has remained above 45% in the past 10 years. The Company has outpaced overall industry growth. While the worth of the Indian innerwear market grew 13% y/y in 2015, the Company’s sales grew more than 30% y/y. Page has a high-single digit market share in the Indian innerwear industry. Its share of the market is significant, given that the Indian innerwear market is largely controlled (more than 45%) by unorganized players. The Company’s growth will be supported by structural growth drivers such as rising discretionary spending, growing number of mid-high income households, rising urbanization, and transition of the innerwear market from functional to fashionable. The Company’s core brand Jockey enjoys strong brand equity and operates in the niche mid-to-premium segment. The new Goods and Services tax will further fuel growth for Company’s products.