Industry: Aggregate visits showed a strong acceleration from -7.4% to -5.6% this week, while the 5Wk Avg slightly accelerated from -7.1% to -6.9%. Similar bounce to what we saw in the Redbook numbers yesterday, as well as September Retail Sales, which prompted a rally in the group. We wish the Personal Savings Rate and Consumer Credit numbers would come out on the same day as Retail Sales -- as we think the Consumer is stretching their wallets to spend on goods. This might be bullish near-term but sets up for a supremely bearish 1H24. The current expected earnings growth in Retail is ~35% for 2024 -- while we think it's going to be negative. Be careful what kind of growth you're underwriting for next year, and stick to Longs that have idiosyncratic drivers to grow the top line -- like AMZN, RH, NKE, FL, SKX, TJX and REAL. We're broadly short almost everything else -- top short ideas include HELE, GOOS, LOW, TPR, W, ADDYY and PANDY.
- Notable Industry Callouts: Aside from Beauty & Spa, which saw a slight decline in the YY rate of change (Best Idea Short ULTA & SBH), the industry subcategories that we care about generally saw decent to strong accelerations in the YY ROC week to week. Home Improvement ticked up from -12.8% to -11.6% (Best Idea Short HD, LOW, & FND), Clothing accelerated from -3.1% to +1.3%, Department Stores jumped from -16.2% to -11.4% (Best Idea Short JWN, Short Bias M), and Electronics accelerated from -13.5% to -11.6% (Best Idea Short BBY). These strong subcategory accelerations account for the overall increase in the Aggregate Weekly Visits chart… But remember, a week or two of accelerations does not mean the overall negative trend is over. When Beauty & Spa jumped 2 weeks ago it was immediately slashed the week after. We still see downside to the overall visits trend, but the next few weeks will be interesting given the earlier start of holiday shopping/deals this year.
Companies: Numbers below = YoY Rate of Change from week to week
- Notable Accelerations: Lovesac +17, Tiffany & Co. +16%, Arhaus +11%
- Notable Decelerations: Kay Jeweler’s Outlet, Casual Male XL -10%
Recent Winners & Losers:
- Loser: Auto Parts & Services – AZO, ORLY, AAP, MNRO, VVV, DRVN, Etc. These are names that we would not expect to see such a significant visits decline in given their inherent--less-discretionary—nature, but visits currently look awful across the space (albeit still outperforming retail in aggregate). While we do not have active calls on AZO, ORLY, or AAP, we think it is important to note the that the biggest players in the space are seeing just as much of a visits hit as the likes of Best Idea Short MNRO (although they may not be entirely directly comparable). We remain positive on Best Idea Long VVV, which we believe offers a compelling unit growth story made even clearer by the separation of its global products division, a supreme value prop, strong comps, high margins, no Amazon risk, low cyclical risk, and franchising opportunity. We also have DRVN on our Best Idea Long list, which although it was wacked recently, still holds strong value in its Take 5 business. While we recently took both lower on the Best Idea Long list as the rate of change near term is less bullish and we like the TREND setup for other names on our Long list better, we still think these are quality long-term performers, and ones we’d still be long near term relative to retail in aggregate on the expected slowdown in discretionary consumption.
- Winner: Sporting Goods – DKS & ASO. This was a solid bounce-back week in the Sporting Goods subsector after months of an intense slowdown in visits. We currently do not have a call on ASO, but DKS remains on our Short Bias list.
- Additional: Best Buy. Best Buy announced the other day that they will begin their Black Friday deals on October 30th this year, in effect pulling forward demand. Although visits at the company have been on a downward trajectory for the past few months there could be a material uptick in the coming weeks. Best Idea Short BBY.
Charts
- Industry
- Companies
Source: Placer.ai
