Retail Sales Were Up 0.6% In February, But Ripple Effects from the Iran War Could Reverse That Trend. Here Are 2 Consumer Staples Stocks That Can Withstand Them.
Key Points
Retail sales were strong in February, but likely got worse in March.
Dollar General should be a beneficiary of consumers trading down.
Tobacco stocks like Philip Morris International have long demonstrated in resilience in recessionary environments.
- 10 stocks we like better than Philip Morris International ›
The last snapshot of U.S. consumer spending before the Iran war began showed stronger-than-expected growth.
Retail sales were up 0.6% in February from the prior month, beating estimates at 0.4% growth. Spending was up broadly, including in discretionary categories like department stores, restaurants, and cars.
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Still, the report didn't do much to quell concerns about a recession, as the Iran war has rewritten the economic calculus since then, with oil prices up by a third, lifting both fuel prices and goods that need to be shipped and that use petroleum as an input.
As a result, investors are looking for safe places to park their cash, and consumer staples stocks are always popular for that purpose as they are defensive, recession-resistant, and most of them pay dividends.
On that note, let's take a look at two consumer staples stocks worth buying to weather the storm.
Image source: Getty Images.
1. Dollar General
Dollar General (NYSE: DG) has a long track record of benefiting from consumers trading down in tough times. Comparable sales soared in 2008 and 2009 during the height of the great financial crisis, and the pressure from higher energy prices could drive similar behavior now. In fact, management said it was already seeing such behavior last year in response to sticky inflation and a weak labor market.
Additionally, Dollar General has made investments over the last year to improve the business, such as improving out-of-stocks and faster checkout times, and those have paid off with solid comparable sales and profit growth in 2025. The company also continues to expand its footprint and renovate its existing stores.
Finally, the stock trades at a price-to-earnings ratio of just 17, making it much cheaper than industry leaders like Walmart and Costco.
2. Philip Morris International
Tobacco is well-known as a recession-proof sector, and Philip Morris International (NYSE: PM) has been the best-performing of the three big tobacco stocks in recent years.
Philip Morris has successfully pivoted to next-gen products, in particular, Zyn oral nicotine pouches and Iqos, a heat-not-burn device that functions like a vape but uses real tobacco.
As a result, Philip Morris is delivering much stronger growth than the rest of the tobacco sector with organic revenue up 6.5% last year to $40.6 billion and a 10.6% increase in organic operating income to $14.9 billion.
Philip Morris is also a solid dividend payer with a yield of 3.7% and has a reasonable valuation at a price-to-earnings ratio of 21.6. Like Dollar General, it looks like a good stock to own to ride out any volatility from the war in Iran.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Walmart. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.
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