As earnings reports continue to come in, Brian McGough says it’s become even more apparent retail is going out of style in #Quad4.

“People ask on these conference calls about what products are selling, if people like stripes vs. solid colors. It’s all bullshit, it doesn’t matter. Credit matters,” explains Hedgeye’s Retail analyst in this clip from The Macro Show. “That’s what you’ve got to focus on, and that’s the first line I look at as these companies put out numbers.”

Retail traffic hit an all-time low Wednesday. Companies have been getting “kicked in the teeth,” McGough says, including perceived safety stocks that had performed well post-pandemic.

“Even the winners, like Ulta, which is a ‘Best Idea’ Short – I’ve been short this since 400, and it’s now about 500, so I’ve been wrong on it – but traffic is absolutely cracking,” he adds. “It’s not immune to the consumer.”

When there’s concern about the future of the job market, people prioritize saving over discretionary spending. Since June 2022, personal savings rates increased from 2.7% to 4.6%.

“It’s probably headed higher,” McGough says, “particularly if you heard what Josh Steiner said about us being in a very unfavorable point in the job cycle, which is something you’ve got to take very seriously.”

McGough: “Even the Retail Winners Are Starting to Crack” - TMS Banner