Industry: Our aggregated retail traffic data is now back to its relative lows after a YY rate of change deceleration from -7.0% to -9.45 (-7.0% to -7.5% on a 2Yr Avg basis), which is a massive move for the industry on a 1-week basis. This flies in the face of the accelerating Redbook sales numbers we saw yesterday, so the question is what to believe? We think that the Redbook numbers match up closer to Government Retail Sales, but the traffic trends are a far better read at the public company level. As it relates to the better Redbook/Retail Sales read, while this might be bullish in the near-term, it is being driven by the consumer taking down personal savings rate to cycle-lows (at the same time the return on cash is at cycle highs and the consumer has never had more of a financial incentive to save), and consumer credit being extended at meaningfully higher interest rates. Ultimately, the savings rate can go lower, and installed credit could go higher. After all, Americans will always find a way to spend -- until they can't. Ultimately it sets up a supremely bearish 1H24. With earnings season in retail beginning, we have already seen multiple reports supporting our overall bearish retail view. As we continue to highlight, 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: Like last week, the significant deceleration in aggregate visits this week was propagated by further significant decelerations in the underlying subcategories. Hobbies, Gifts, and Crafts fell over 7 points from -10.1% last week to -17.5% this week, Superstore visits decelerated from -7.5% to -10.3%, Electronics store visits also fell 7 points from -12.4% to -19.7% (Best Idea Short BBY & GME), and even Discount & Dollar Stores saw a big deceleration from +0.5% to -4.1%. On the contrary, Home Improvement, which we think will continue to face major issues moving forward, saw a slight acceleration from -11.7% to -10.8% (Best Idea Short LOW, HD, & FND; Short Bias TSCO), and Car Shops & Services also accelerated from -3.7% to -0.8% (Best Idea Long VVV & DRVN; Best Idea Short MNRO). Overall, the traffic data continues to support our short retail thesis that we've correctly had for the past 18 months. Believe us, we want to be bullish. But it's simply too early with earnings expectations for 2024 so elevated.
Companies: Numbers below = YoY Rate of Change from week to week
- Notable Accelerations: MarineMax +11%, Pandora +10%
- Notable Decelerations: Bluemercury -25%, Big Lots -18%, Aritzia -17%, Tiffany & Co. -16%, Casual Male XL -14%, Homesense -13%, Vera Bradley -11%, Gamestop -10%
Earnings Look Ahead: 2-Weeks Out
European Wax Center (EWCZ -- Short Bias): Quarterly Consensus Sales: +7.1%
Warby Parker (WRBY -- Long Bias): Quarterly Consensus Sales: +10.7%
Callaway TopGolf (MODG -- Short Bias): Quarterly Consensus Sales: +6.7%
Dillard's (DDS): Quarterly Consensus Sales: -4.4%
Sally Beauty (SBH -- Best Idea Short): Quarterly Consensus Sales: -3.3%
Valvoline (VVV -- Best Idea Long): Quarterly Consensus Sales: +16.4%
Home Depot (HD -- Best Idea Short): Quarterly Consensus Sales: -2.8% (comps -3.1%)
Recent Winners & Losers:
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Loser: Gamestop. Traffic at Best Idea Short GME looks absolutely abysmal as visits decelerated over 9.5 points this week from -14% YY to -23.6%. Since June, visits have been on a major downward trend… and so has the stock, falling -50% from a high of $27 to $13.50. GME remains a Best Idea Short as visits continue to weaken and earnings growth will be hard to come by in this macro environment . We think this stock could break $10 before we even get to see whether a turnaround can be executed.
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Loser: Ollie’s Bargain Outlet. Like GME, traffic at OLLI has looked awful, but the stock continues to move higher. While we do not have a call on the name, this is a stock that we will continue to do more work on given the interesting dynamics at play. If we had to make a call on it today, it'd be Short.
Charts
- Industry
- Companies
Source: Placer.ai
