Strong July Retail Sales, TjMaxx Blueprint for Apparel Retail Success
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This Week's 15-Second Research Posts
The Atlanta Fed’s GDPNow model is estimating a shocking +5.9% y/y real GPD increase for 3Q23 (official reporting date 10/26) which is notably adjusted for inflation. While this forecast is substantially higher than the Blue-Chip consensus estimates (the high-end of the range is still under 3%), it points to considerable retail strength…
In our last post, we highlighted how the Atlanta Fed is now forecasting an astounding +5.9% y/y real GDP growth for 3Q23. In this post, we look at the 2Q23 financial performance of the largest retail consumer companies to triangulate actual results on main street with government forecasts.
Estimated monthly sales for retail & food services increased +8.4% on an annualized, sequential m/m basis during July 2023. While this looks great and helps explain the Atlanta Fed’s forecast for +5.9% 3Q23 real GDP growth, a closer look at the details reveals ongoing consumer struggles.
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Nearly 5MM customers were added in the past year across both Dollar Tree & Family Dollar, with slightly over half of these customers having a household income of +$125,000.
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Nordstrom’s credit card revenues were up +10% y/y during 1H23 with lower-than-expected credit card losses. However, delinquencies are rising gradually and are now above pre-covid levels, suggesting higher credit losses during 2H23 & into 2024 (although credit losses aren’t projected to be anywhere near where they were during the 2009 financial crisis).
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2023 comp guidance of flat to +2% reflects continued macroeconomic uncertainties including the upcoming resumption of student loan repayments. However, Dick’s real concern has to do with retail theft which pressured 2Q margins and is expected to ramp up during 2H23.
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TJX is well positioned as the leading off-price apparel & home fashions retailer well known for value (particularly as it relates to delivering desirable brands). Strong sales & profits during the quarter reflected share gains and provides a good example of how some apparel retailers can succeed in the current economic environment.
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The Gap seeks to be careful and mindful of the mixed economic and consumer environment that it must navigate. Management assumes headwinds will continue during 2H23, especially given the resumption of student loan payments.?
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Big Lots’ core lower-income customer remains under significant pressure and has limited capacity for higher ticket discretionary purchases. However, results outperformed initial guidance, with some sequential comp improvement noted in the quarter. Comp guidance is calling for a low-teens decrease during 3Q and a high-single-digit decline during 4Q.
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Full-year 2023 restaurant originations (excluding sale-leaseback financing) are now projected to be $8.3B, -35% lower than initial expectations at the beginning of the year.
To Order The Full RR 1H23 Lending & Valuation Report: Email Wally: [email protected]