Afternoon Consumer Wrap
Consumer sector ending the day on an attempt to find a bottom and stabilize after underperforming the SPX. XRT/SPY pair is (10%) MTD and RSPD (eq-weighted Discretionary) relative to SPY is below Covid lows and below GFC lows (20-year chart below). Consumer is trying to stabilize on what historically is a solid week for the sector (see BofA comments below), but I think it needs a clear path for Iran resolution in order to see a more generalized strength across the sector.
Equal Weight Consumer Staples (RSPS) closing +1.59% and Equal Weight Consumer Discretionary (RSPD) +0.56%. As we can see below, both sector charts seem yet choppy but trading near support levels and look like they want to bottom here.
GS CONSUMER: BELLWETHERS EARNINGS CAN HELP STABILIZE THE SECTOR
CONSUMER RELIEF RALLY THIS WEEK AHEAD? BOFA THINKS YES
27% of Consumer market cap prints this week including WMT, TGT, HD, LOW, TJX, ROST, and RL, and Mike Dick, BofA consumer sector spec, expects these Quality proxies to sound resilient and confident despite macro noise and a soft preceding tape.
Historical work shows XRT outperformed SPY in 8 of the last 11 busiest-by-market-cap Retail reporting weeks, suggesting tactical relief is plausible after XRT's -10% MTD underperformance. Mike concedes a stronger bellwether week likely doesn't dismantle the sector bear case outright. Separately, the firm's Airlines analyst Andrew Didora notes every carrier at last week's BofA conference described demand and pricing as "very healthy" with no cited elasticity, though all are looking for it.
SWEETGREEN (SG) TRADING WELL AFTER EARNINGS
This chart and today’s price action in heavy beaten down Sweetgreen (SG) called my attention:
The story here? Improvement in traffic trends since April and rollout of menu innovations (wraps, etc) which can be game-changer if execution works.
Also alternative data in SG seems to be trending in the right direction
BOFA EARNINGS QUICK COLOR PRE-EARNINGS
AS: BULL CASE INTO TUESDAY AM PRINT, GUIDE RAISE EXPECTED
Generally long positioning into the print (options imply 9%) with focus on Greater China where recent quarters have run +low-to-mid 40s. On the FY guide debate, BofA says a raise is the answer, even if just a F1Q beat pass-through, noting AS has raised FY EPS every eligible quarter and FY revenue every eligible quarter but once (May 2024). The firm adds both Salomon and Arc’teryx have enough momentum to beat 1Q and expects upside to flow through. Stock is -19% since last report, with positioning still leaning long as the “best house on a challenged block.”
HD, LOW: COMPS SEEN 0-1%, GUIDES REAFFIRMED, HD THE FASTER RE-GROSS
BofA models comps in the 0-1% range for both with LOW a touch better than HD, and expects FY guides reaffirmed (options 3%/4%). Positioning feels very light, the rates rally hasn’t helped, and buy-side feedback to BofA reinstatement (HD Buy, LOW Neutral) was apathetic; the firm thinks HD is the faster re-gross candidate if flows turn. Housing buy-siders remain broadly very bearish on the complex. YTD: LOW -9%, HD -14%, FND -29%, TSCO -39%.
CAVA: SETUP FOR BEAT/RAISE, POTENTIAL SUB-SECTOR OUTLIER
Buy-side bar is around +8% comp into Tuesday PM (options 11%), though the recent -21% drawdown from YTD highs likely reset expectations as Fast Casual has been punished all season. BofA is in the camp that CAVA could impress with a beat, raise, and still-strong unit growth, standing out as a positive outlier and potentially rallying. Firm previews a +6.1% F1Q comp and, at the expected 2025 +17% unit growth rate, sees a path to 3,000 stores in 12 years.