Industry: Aggregate YY Visits remained basically flat -6.4% this week, however, the 5Wk Avg trend continued negative from -5.0% to -5.6%. As we have been highlighting over the past two months, visits remain staunchly negative, with plenty of more room to fall given the weakening consumer.
- Notable Industry Callouts: This was a unique week across the industry given that aggregate visits decelerated yet the majority of its subcomponents accelerated. For one, Beauty & Spa saw an acceleration from +2.8% to +6.0%, while Electronics Stores accelerated from -17.3% to -12.0%. However, a one-week acceleration does not mean that the two categories bucked the negative trend—especially when considering the consumer headwinds facing the U.S. in the coming months. Reflecting this idea, Beauty & Spa and Electronics Stores both decelerated on a 5Wk Avg from +5.6% to +4.9% and -11.1% to -12.0% respectively. Best Idea Short ULTA & SBH and Best Idea Short BBY & GME. Carrying the bulk of the slight decel/flat aggregate trend was the continued weakness in Superstores which decelerated from -5.2% to -6.0% and from -3.6% to -4.5% on a 5Wk Avg basis. Short Bias TGT. Despite the accelerations across our industry data, visits remain squarely negative across almost all categories, especially ones with more discretionary products.
Companies: Numbers below = YoY Rate of Change from week to week
- Notable Accelerations: Ethan Allen +15%, LL Flooring +13%, Havertys +12%
- Notable Decelerations: Kay Jewelers Outlet -24%, Bath & Body Works -15%, Vera Bradley -13%, Fix Auto -13%, Lovesac -11%. Our Carter’s sample saw a deceleration from -8.1% to -10.8% and is looking very poor on the 5Wk Avg. Golf also remains weak as we move closer to the beginning of the end of the season in the Northeast. Best Idea Short GOLF and Short Bias MODG.
Recent Winners & Losers: Another week of big losers and few winners.
- Winner: Off-Price Apparel - TJX, BURL, ROST. Visits at off-price apparel retailers have remained very steady throughout 2023 and, relative to the rest of discretionary retail, are significantly outperforming as an industry. This is backed strongly by Best Idea Long TJX, which, although saw a slight visits deceleration this week, is sitting in the range of 10-20% YY visits growth throughout 2023. This also happens to be the case for its subsidiary--Marshalls--which boasts the same impressive visits trend. Visits at Short Bias name BURL have also held up very well compared to retail as a whole, however, we remain short given Burlington's perception that it is underearning, when we think the current margin structure represents long-term economic reality. Additionally, ROST, which we do not have a call on (but if we had to it'd be Long), has positive visits growth year over year--though on a rate of change perspective is trending down significantly. In total, off-price apparel has clearly benefited from the trade down effect as consumers look to make their dollar go further in the tougher macroeconomic environment. We expect this trend to continue moving forward given the upcoming consumer headwinds.
- Loser: Tapestry. After its announced acquisition of CPRI, TPR sits at the top of our Short Bias List for many reasons. While it could likely be a long when issues are cleaned up, the resulting leverage at TPR and expected channel stuffing by John Idol at CPRI are very negative reads for the business in the short term. Looking at visits across TPR’s two biggest brands, things do not look great either. At Coach, visits took a major hit this week, decelerating from -19.1% YY to -23.5%. On a 5Wk Avg basis, visits also decelerated from -12.2% to -16.0%. At Kate Spade, visits look better than Coach, but are still trending lower. This week, visits were up slightly from +8.3% to +8.6%, but on a 5Wk Avg basis saw a deceleration from +8.1% to +6.4%. Overall, TPR’s lower tier affordable luxury brands face increased risk with consumer headwinds given their core customer is more sensitive to changes in directional spending than the ultra-high income consumer shopping at Louis Vuitton or Hermes. Therefore, visits could look a lot worse in the coming weeks to months. Short Bias TPR (which we're VERY tempted to make a Best Idea Short) given the leverage upon closing and a likely EBITDA guide down.
- Loser: Signet. Short Bias name SIG has seen visits at Kay Jewelers, Kay Jewelers Outlet, and Jared trend down over the past few months as consumers tighten discretionary spending. At Kay Jewelers visits decelerated from -6.3% last week to -9.4% this week, with 5Wk Avg visits decelerating from -4.2% to -6.1%. At Kay Jewelers Outlet, visits saw a huge drop this week from +25.9% to +1.9% and is beginning to turn on the 5Wk Avg as it decelerated from +18.0% to +17.2%. At Jared, visits accelerated this week from -9.8% to -8.1% but continued to trend lower on the 5Wk Avg from -8.0% to -8.2% after beginning another downward trend in July. In total, visits across Signet’s store base are weakening -- notable for a category that is still overconsuming by 40% vs pre-pandemic levels.
- Loser: MarineMax. High-cost ultra discretionary companies are not where you want to allocate your capital when heading toward an environment with a high probability for a consumer slowdown. Unfortunately for Best Idea Short HZO, it fits the bill perfectly—especially after overearning throughout and following the pandemic. With visits at MarineMax slowing significantly from -25.5% last week to -33.0% this week, there is still plenty of room for visits to decline given its relative positive trend since the beginning of the year and expected consumer environment that we are heading toward in the US. Best Idea Short HZO & ONEW.
Charts:
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Source: Placer.ai
