Key Points: Employment is the engine of consumption growth, and it’s shifted into low gear. The aim of this report is to determine whether monetary policy will soften the blow. We assess the effect lower rates might have on (i) the consumers’ P&L, (ii) the low-end consumer, (iii) spending on goods versus services, (iv) the housing market, and (v) home values.
After turning more cautious on the consumer, we’ve received a lot of questions from clients. This report seeks to address those queries while adding a healthy dose of micro analysis to our macro call. We share updated thoughts on autos, RVs, housing-related stocks, staples, and leisure. We also dig into historical return profiles of consumer stocks.
Key Points: Our optimism for the US consumer has been well placed. The consumer has been remarkably resilient over the past few years, largely due to strong labor markets and bulletproof balance sheets. The current year is off to a good start, but as we peer into 2025, we expect spending to slip into a lower gear.
Key Points: The low-end has been struggling for a while, but recent commentary from McDonald’s, Dollar Tree, Five Below, and others has fueled investor concerns. The aim of this report is to add clarity to the debate, and to determine whether a bet on the low-end makes sense.
Key Points: When it comes to the consumer, market participants spend a lot of time and energy studying the demand side of the equation. Supply dynamics often get short shrift. In this report, we analyze the supply of labor, the supply of fixed capacity, and the supply of inventory. Understanding the supply side can also tell us something about where inflation is headed.
Key Points: There were more than a few landmines in the consumer sector during Q1 earnings season, and lately, it’s been bellwether stocks like Starbucks, McDonald’s, Nike, and Lululemon that’ve been sounding the alarm. The aim of this report is to understand whether Q1 results signal a softening consumer, or if the issues are idiosyncratic in nature.
We hosted a timely webinar that outlined a few tail risks. Employment growth is being driven by acyclical sectors like government and health care. Both of these are under a microscope. Job gains are heavily skewed to large firms with over 500 employees. That adds risk to the equation. Immigrants have also been driving the train, but for how long? Tail risk is also discernible within PCE. Obscure categories are growing twice as fast as “bankable” categories. Have a listen!
Hal Lawton joins a growing list of CEOs that’ve graced us with their presence. He shared key insights on our podcast. We talked about how a tight housing market pushed Millennials into TSCO’s catchment area. We talked about TSCO’s 7% market share, and the fact that outsized comps were driven by transactions, not ticket. TSCO has no direct peer — that means it doesn’t have to share its slice of the market with “like” competitors or fall prey to their mistakes. Give a listen!
We hosted a webinar to review the state of the consumer and to detail why 2025 might hold a few surprises. We dive into the labor markets with a focus on immigration; we assess the implications of other policies such as tariffs and taxes; we explore household balance sheets to understand how wealth and leverage might influence consumer spending. Our take is that a softening consumer will impact the interest rate environment, and that in turn, can have meaningful implications for stock selection. The slides…
Brinker has been on a tear. Same store sales have been ripping even as other restaurants are struggling. We talk with CFO Mika Ware who has a unique perspective on the company’s turnaround. It’s a classic case of blocking and tackling — slimming down the menu, simplifying recipes, improving standards, and killer marketing that’s informed by insights and data. It sounds like Brinker has more work to do at Chili’s, and it might be able to replicate that success with other banners.
Bill Rhodes led AutoZone for nearly 20 years. Over that time, the auto parts industry faced major change — auto cycles have come and gone, the industry has consolidated, e-Commerce has altered the landscape, and vehicles have become laden with technology. So far, it seems that the more things have changed, the more they’ve stayed the same — AutoZone has remained relevant to its customers and its business model has stayed the course. More change is on the horizon — EVs are making inroads, etc. …
Friday’s revision to income and spending data has caused confusion. We’ve prepared a 10-minute podcast to review the investment implications. Some of the changes can be disregarded as noise, but there are three important takeaways. First, the latest iteration of personal income is highly disconnected from labor market data. Second, this is not the first time savings rates have been meaningfully revised, nor will it be last. Investors should move on from using the savings rate as an investable data point. Household balance sheets are…