RBGLY Reckitt Benckiser PLC (PK)

By Aaron Back 

Makers of household goods like tissues and cleansers have been among the biggest winners from the coronavirus crisis. But in Colgate-Palmolive's quarterly results Friday, there were early warnings that the good times may not last.

So far this year, consumer-staples makers are up by between 5% at Procter & Gamble and 50% at Clorox against a basically flat performance for the broader market. Colgate-Palmolive falls in the middle of the pack, having risen around 12% this year.

As with others in the sector, Colgate's second-quarter earnings were strong. Organic sales, which strip out the impact of mergers and currency fluctuations, rose 5.5% from a year earlier, and soared 11% in North America.

But a closer look turns up some reasons for caution. In regions of the world where Covid-19 was early to flare and is now receding, Colgate's results were less impressive. In Asia Pacific, organic sales were up just 0.5% from a year earlier. In Europe they were down 1.5%. Consumers in Europe, the company said, are destocking after loading up their pantries in the first quarter.

Of course things aren't likely to fully resume as they were anywhere. Among the legacies of the pandemic will be some more lasting behavioral shifts, possibly including an increased appreciation of the importance of hand washing and good hygiene.

Colgate hinted at this as well on its Friday conference call, saying that while it expects demand to stay elevated for products such as hand soap, others like toothpaste may see a reversal in the second half.

This suggests the lasting impact from Covid-19 on consumer-staples makers will be uneven across product categories. Makers of soaps, sanitizers and the like will likely keep winning. This includes Clorox as well as Reckitt Benckiser, the U.K.-based maker of Lysol.

But others look less well-positioned, including Kimberly-Clark, whose portfolio is heavily weighted toward tissues, toilet paper and diapers, and also P&G. It isn't obvious why many brands owned by the Cincinnati-based giant of the industry -- such as Crest toothpaste, Pantene hair products, Old Spice deodorant and Pampers diapers -- should see any lasting benefit.

The future remains hazy, but it seems clear that the stay-at-home party in consumer staples is coming to an end.

Write to Aaron Back at aaron.back@wsj.com

(END) Dow Jones Newswires

July 31, 2020 11:22 ET (15:22 GMT)

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