Industry: Our Aggregate Store Visits dataset saw a slight acceleration in this week’s update, with the 5Wk avg continuing to improve for the 7th consecutive week. However, the 2 and 3Yr trends both decelerated, implying this week’s acceleration was on easing compares. Overall, traffic continues to improve with easing compares moving forward and a slightly better consumer outlook. Redbook Retail Comp Sales look awful on a trending basis but have seen some signs of stabilization over the past few weeks, coinciding with a continued YY improvement in tax refunds. This improvement is likely permeating throughout the system, with some confirmation by Five Below which noted that February sales were soft, but that March was accelerating likely due to the improving tax refund dynamic. It is interesting to note, though, the K-shaped recovery in the economy that we are seeing, in which higher income consumers remain well off, while low-to-middle income consumers struggle to purchase everyday items… FIVE even noted continued pressure from shrink… keep in mind these are sub-$5 trinkets that people are stealing, meaning practically zero resale value. This is very different from the organized crime that we saw at the likes of Home Depot et al. While we are getting more constructive on retail in aggregate, in part because of Hedgeye Macro’s improving economic outlook (Summer monthly Quad 2s), there are clearly some unique dynamics at play driving names across all retail subsectors and income buckets.
- Subsectors: Interesting to note that the accelerations were in less discretionary, bigger ticket categories… This could be the potential lift from tax refunds hitting consumers’ wallets after months of pushing out this type of spending.
- Acceleration: Home Improvement, Car Shops & Services
- Deceleration: Beauty & Spa, Recreational & Sporting Goods, Hobbies, Gifts, & Crafts, Superstores, Department Stores, Discount & Dollar Stores, Pet Stores & Services, Shopping Centers
- Flat: Clothing
Companies: Numbers below = YoY Rate of Change from week to week
- Notable Accelerations: Tiffany & Co. +25%, Bluemercury +17%, New Balance +13%, Warby Parker +11%
- Notable Decelerations: Zara -15%, ASICS Outlet -13%, Ulta Beauty -9%
Company Callouts:
- H&M (HNNMY—Best Idea Short). H&M has not seen the same recent visits (and sales) recovery or strength as the likes of its peers in Zara, Abercrombie & Fitch, and Gap. H&M was once the dominant model in apparel for disintermediating the traditional fashion retailers with inexpensive fast-turning sales of trend-right apparel. While it grew up over the past decade, the company got way too big to remain at the top of the fast-fashion food chain, amassing a fleet of ~5,000 stores globally – a number that’s both staggering and unsustainable (and which is now at ~4,300). SHEIN continues to pose the biggest existential threat that H&M has seen since Primark. We recently did a Black Book on the deflationary impact that SHEIN will continue to have on global apparel retail. (Note CC Data ‘Observed Sales’ is on a lag).
- Beauty Divergence | ULTA (Best Idea Short) & SBH (Best Idea Short). Over the past few months ULTA and SBH (both Best Idea Shorts) have seen very different visits trends, in part due to comp dynamics. While Ulta has a broader range of price points across beauty products, Sally is more concentrated in lower price point products (though still sells some higher end). ULTA traffic is still broadly positive and SBH still negative, but there is a very clear trend divergence between the two, in which SBH has seen a major acceleration from the -20% YY lows to now only -5%, while at ULTA visits remain choppy and have to face massive summer comps. Sales trends look similar at the two stores, but maybe accelerating traffic at SBH is a sign of consumers looking for better value in the beauty space after years of major overconsumption and price increases.
Chart List:
- Industry
- Companies
Source: Placer.ai
