By Thomas Paulson, Head of Market Insights On Wednesday, Walmart had a well-timed investor day to make its pitch on why it is a steady ship in all sorts of tempests (and sunnier periods), and the justification for accelerating the number of Sam’s Club openings. Big picture, what we heard: (1) while Walmart sources mostly from US suppliers (2/3rds of COGS), China is also a large supplier, meaning that tariffs could be a meaningful impact on the business as they will be judicious on what gets passed through to the consumer, (2) February was a very soft period for its sales of discretionary goods, but March was much improve (something that we’ve broadly covered ), and (3) it’s US ecommerce business, as part of its omni-channel consumer offering, has flipped to profitable.

By Thomas Paulson, Head of Market Insights Yes, the stock market and economy are in a tempest, and investors have been de-risking their portfolios and cutting exposure to cyclical companies and those that have too much debt; that change in preferences favors consumer staples and utility stocks. How about telecom? After all, few households can risk cutting their wireless subscription to save money, (unless they’re planning to escape the potential calamity by riding out the next two years on a deserted tropical island.

By Thomas Paulson, Head of Market Insights Last Friday, we delivered a presentation to Morgan Stanley’s institutional clients. Our conclusion of the work was that consumer spending had picked up in March following a slow start to the year. However, given Wednesday’s news, what happened in March was of limited importance as the focus ripped over to “how bad are things going to get.” Well to understand how significantly things moved, one needs a starting point.

By Thomas Paulson, Head of Market Insights Lululemon’s quarterly results in the Americas segment (Canada and the United States) were flat on a comparable basis; the segment’s revenue increased +2% (ex-unusuals) reflecting the contribution of more locations. Advan estimates that traffic per location increased +4%, but that was offset by a decline in the conversion rate and store-level average-ticket; as such, the reported results align with Advan’s estimates. In Wall Street lingo, LULU is known as a “battleground stock,” with the different sides debating / fighting over whether Lulu is facing competitive encroachment by Vuori and Alo Yoga.

By Thomas Paulson, Head of Market Insights We’ve recently analyzed Sprouts Farmers Market’s strong 2024 performance and highlighted its success of driving capturing market share and avoiding the grocery industry’s woes. That success stems from merchandise differentiation (see the figure below). The merchandise strategy and the successful execution come from its team – a team that Sprouts affectionally calls its “foragers.” Since the results, Sprouts has met with investors and updated them on Sprouts medium- to long-term aspirations, particularly on retail store expansion, which is to be at a 10% rate in the markets shown in the chart below.

By Thomas Paulson, Head of Market Insights Dollar Tree reported an improvement in its comp-store sales trend due to an improvement in its discretionary business (as did Dollar General, Walmart, and Target). The discretionary comp increased by +0.4%, the first positive number of the year; moreover, its 2- and 3-year trend also improved. The earnings release quotes CEO Mike Creedon saying, “2024 [finished] on a high note with strong execution at Dollar Tree as growing customer acceptance of our expanded assortment drove sales momentum.

By Thomas Paulson, Head of Market Insights RH reports quarterly results next week and we expect strong revenue growth of +12% ($829M). RH has seen its revenue improve each quarter this past fiscal year, after declining -16% last year (meaning 2023). Visits are up roughly 10% for the quarter which is similar to FQ3. Given the lower conversion rate of the category, these metrics are less helpful in understanding revenue, but the trend is.

By Thomas Paulson, Head of Market Insights Lately, we’ve read some commentary that CEO Brian Niccol’s plan to turn Starbucks around has failed to turn the business, because the brand has lost some wallet share. However, Niccol didn’t plan an immediate turn; he has planned for a long-term sustained improvement in the business. A key strategy of the plan is to return Starbuck’s status as a “third place,” which in a fashion is customer love for the brand.

By Thomas Paulson, Head of Market Insights Ollie’s Bargain Outlet Holdings reported solid FQ4 results with adjusted sales growth of +9% to $667M (just shy of Advan’s estimate of $672M). Growth was driven by a +2.8% comp-sales increase and 47 (+9%) more stores over the past year, including locations taken over from Big Lots and 99 Cents Only. The earnings release quoted CEO Eric van der Valk saying, “With so many retailers closing stores or going bankrupt in the past year, there are a considerable number of abandoned customers, merchandise, real estate, and talent in the marketplace.

By Thomas Paulson, Head of Market Insights Over the weekend, again numerous press and blog reports declared Target’s store traffic to be down due to boycotts and upset feelings over Target’s messaging around DEI. However, those reports cite a traffic decline YoY against a week last year that included an extra day (Leap Day). We adjust for that by using 7-day and 91-day rolling periods and Advan’s data shows no unusual trend for Target vs.