With FQ3 results from Walmart, Targe t, Home Depot , and Lowe’s, it is clear that our K-shaped economy is becoming more pronounced , and its “pronouncement” is now undermining aggregate consumer expenditure and the retail industry (and CPG). In response, retailers and brands are focusing even more on affordability and being more tactical in any price increases in response to tariffs or cost inflation. (See our story –What’s happening in Vegas, isn’t staying in Vegas) That, in turn, is pressuring margin rates and profits.

As previewed (Housing-Related Retail – Are Things Improving? It depends upon your neighborhood, if pricey, then yes), the comp-sales results of Home Depot and Lowe’s improved slightly on a 2-year basis, but softened on a 1-year basis (lapping hurricanes). Comp-ticket and big-ticket are accelerating, driven by stronger growth in big-ticket items (appliances, power tools, etc.) and bigger Pro-oriented projects. Home Depot CEO Ted Decker said, “While underlying demand in the business remained relatively stable sequentially, **an expected increase in demand **in the [fiscal] third quarter did not materialize.

With Target’s FQ3 results, we wanted to circle back to our preview note , “Target – Updated views on Target’s performance, any good news?” In that note, we opined that there were a few key things to listen for in the results, while also highlighting the competitive challenges. Below we highlight those items, along with what we heard. Our conclusion from all of this is we see progress in both management qualitative comments and Advan’s data, especially in the month of October – a fairer month to judge progress given that incoming CEO Michal Fiddelke is just getting started with his strategic plan to right Target.

Next week kicks off retail earnings, including home improvement (our preview here ), Target (here ), off-price, and the behemoth – Walmart. Prior to the pandemic, generalists used to view Walmart as an important read on the consumer; however, Walmart generally was a misread, as it skewed rural and to the less-affluent. As followers and readers know , Walmart’s “contemporization” won them significant market share in the suburbs and near-burbs, and with the more-affluent.

The underperformance of HD and LOW since we wrote about their improving results on August 20th is curious. Despite the 30-year mortgage rate declining from 6.6% to 6.3%* and favorable Q3 results from building product manufacturers and furniture / home-related retail, HD / LOW have declined and significantly underperformed the S&P 500. Also pointing to improvement is the NAHB’s remodeling index “which for the third quarter, posting a reading of 60, up one point compared to the previous quarter.

As we saw in Starbucks’ results , Dutch Bros. (BROS) also reported an improvement in its transaction trend with comp-transactions increasing 6.8%, taking the 2-year +430bps higher, and the 3-year +220bps higher. Systemwide sales increased 21% to reach a $2.3B annualized run-rate. Systemwide unit growth of 14% took the count to 1081 locations. These are especially impressive growth given that direct competitor 7 Brew Drive Through Coffee is growing at an even faster rate (150%) on a high level of sales ($1.

MGM Grand has a broad portfolio of premium (Aria, The Cosmopolitan, MGM, and Bellagio) and mass properties (Luxor, Excalibur, New York, etc). Its Las Vegas Strip Resorts reporting segment showed a -8% decline in room-rate, a -5% decline in casino revenue, and a decline in food & beverage sales. Within the portfolio, stronger trends at its premium-end properties were offset by declines in the remainder, i.e. their rate of decline was worse.

After a quarter of controversy on the pace of sales for limited-service operators, the results have spoken; comp-sales did not slow overall. As shown in our restaurant industry indexes, observed visits on a 2-year CAGR basis have largely been flat since July. The 1-year figures are boosted by activity resulting from Hurricane Erin, whereas the depression in September results from lapping Hurricane Helene. Also as a reminder, local / independents are taking traffic share, a topic of our story on Sysco’s earnings; industry peer Performance Food Group is experiencing the same trend with COO Scott McPherson saying, “Starting with Foodservice, the segment built upon its momentum by accelerating independent case growth compared to FQ4 and maintaining chain case growth in the low single digits… On an organic basis, Foodservice cases grew 5.

Since our last story on Target (FQ2 results), the company has had a successful Circle Week event, a Taylor Swift Exclusive, and a large layoff announcement. Given a new CEO, its weak financial performance this year, and the broadening trend of greater efficiency and “delayering” across corporate America, the layoff should have surprised no one. Also not unexpectedly, CEO Michael Fiddelke’s charge to spread the Tarjay across the store with greater urgency isn’t an overnight fix, and certainly not an easy fix.

As we saw with the results from O’Reilly and NAPA, Advance Auto Parts also reported stronger comp-sales and gross profits, and especially on the commercial side (also called DIFM or Pro). Overall comp-sales, accelerated by +300bps, with DIY and commercial improving similarly; commercial comps (+4%) outperformed DIY’s +2%, as is the case for the industry. The observed traffic, shown in the chart, is for all observed Advance retail locations; the prior quarter’s business divestitures and store closures will impact the percent-change observed (which we estimate equates to a 250 to 300 bps headwind to our observations).