On Friday, January 5th at 12:30 PM we are hosting a 1Q24 Retail Themes call. With a November acceleration against an easy compare, and overall decent holiday season, Retail has rallied. The momentum in equity prices was then juiced by a more dovish fed meeting in December and the fall in rates. The stock rally resembles the other points in the year where we saw rate of change improvements post a bearish sentiment shift (i.e., January and June/July of 2023). The tone from investors seems to be not overly bullish on the direction of the consumer, yet expressing little comfort in being bearish on stocks. It looks to be a key point in time as it relates to retail expectations. Will 4Q margins hold up? Will management teams guide to any real growth in 2024? Savings rate for the US consumer ticked up slightly in the last couple months (through Nov data) suggesting perhaps still some room to drive further discretionary spending over the near term, but it still sits far below ‘normal’ levels. We’re seeing accelerated disinflation/deflation in discretionary retail CPI categories, but we really haven’t seen prices crack to the extent we think is likely to happen after such a big runup post stimulus and global supply chain disruptions. We’re still seeing concerning rate of change changes in consumer credit metrics (CC/Auto delinquencies) that suggest rising defaults and consumption risk on the horizon. Additionally, many traditional retailers are getting a 53rd week help this quarter, and therefore lapping it in 2024 sales/EPS. We’ll run through how expectations have tracked after 3Q earnings season and where they look doable vs aggressive into 2024. At first glance, estimates still look too high as we see goods consumption levels as still too high and risk to prices going lower. As always, we’ll review the macro and consumer landscape, analyzing the key points of debate we are hearing from investors in the retail space. We’ll flag the key themes and what you might want to ask management teams as we near the ICR and NRF conferences in January.
Call Details
Date/Time: Friday January 5th at 12:30 PM EDT
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