Consumer Spec - Pre Market Wrap
DECK Upgrades | PZZA, BBY Downgrades | COST Initiation | Lodging Preview, CMG Q2 Checks, SN Channel Work, June Card Spend +6.3%
EU consumer sectors trading flattish on a day with renewed Iran tensions (Crude +4%) and more AI/semi volatility. Thinking today can be a day to lean short consumer and my focus is on BofA report on PZZA to Underperform at $34 after the CFO bolted to AEO — never a good look and SN on a material insider sale despite a positive analyst note. Consumer picture still looks good as BofA card data shows June spend +6.3%, best in four years.
MACRO & MARKETS
CONSUMER SECTOR POSITIONING
Consumer sector positioning/sentiment context in the latest Michael Hartnett Global Fund Manager Survey
Consumer Discretionary stocks relative to the S&P 500, dating back 20 years:
Our take: market will position back into consumer only when there is visibility of coming rate cuts and Hormuz issue fully resolved.
US CONSUMER (BTIG): DISCRETIONARY DOWN NOT OUT, FINDING OPPORTUNITIES IN 2026 WORST SECTOR
The firm notes Consumer Discretionary is the worst YTD sector (-0.50%) and the only one in negative territory, though dispersion is elevated with plenty of constructive trends and bearish-to-bullish reversals emerging. SPX has been consolidating for months and now looks to resolve to the upside, though the analyst has doubts on how far the rally extends given a still-cautious view on semis, and VIXEQ vs VIX at record highs opens the door to a higher-correlation selloff akin to ‘18 and summer ‘24.
Retail (XRT) has been coiled for nine months and looks poised to resolve upside, with a close above 90-91 pointing to 100; constructive charts include BBY, SBH, ETSY (Buy, PT 78), and TGT (Neutral), with potential turnarounds in ANF (Buy, PT 120), LULU (Neutral), NKE (Buy, PT 55), and ONON (Buy, PT 70). Restaurants trying to base as lower pump prices flow through, with constructive setups on CMG (Buy, PT 45), SBUX (Buy, PT 115), and TXRH (Buy, PT 200); Brazil (EWZ) firming above its 200 DMA offers a timely entry, while semis enter their worst seasonal stretch through 3Q.
US CONSUMER (BOFA INSTITUTE): JUNE CARD SPEND +6.3% Y/Y, STRONGEST IN 4+ YEARS
BofA internal data shows total credit and debit card spending rose 6.3% Y/Y in June, the strongest growth in more than four years, with discretionary purchases accounting for most of the advance as gasoline prices fell. The firm cautions some June strength was likely boosted by temporary factors including online promotions and the FIFA World Cup 2026. Payrolls (per BofA deposit data) grew 1.7% Y/Y with gains across both World Cup host and non-host cities, and unemployment payments into customer accounts continued to soften, reinforcing labor market resilience. Lower-income after-tax wage growth rose to 4.1% Y/Y, above middle-income households at 3.4%, narrowing the wage gap as increased job switching helps some workers; sustained momentum in the labor market will drive whether these trends carry forward.
Charts to highlight:
CONSUMER STREET RESEARCH
Upgrades
Casey’s (CASY) Raised to Buy at Northcoast; PT $950
Deckers Outdoor (DECK) Raised to Buy at Jefferies; PT $130
Downgrades
Best Buy (BBY) Cut to Hold at Loop Capital; PT $82
Papa John’s (PZZA) Cut to Underperform at BofA; PT $34
Initiations
Costco (COST) Rated New Sector Perform at RBC; PT $1,000
EARNINGS REPORTS
No consumer earnings reports today
ANALYST RESEARCH & NEWS
TSCO: MIZUHO FLAGS ‘BIG DEPARTURE’ OF CHIEF SUPPLY CHAIN OFFICER TO ORLY
Post-close 8-K reveals EVP and Chief Supply Chain Officer Colin Yankee is departing TSCO to join ORLY in the same role, which the firm calls a surprise given his profile still appears on TSCO’s site. The analyst frames the exit as TSCO losing a key executive amid mounting concerns around competitive edge, margin structure, and earnings algorithm, following July 9 downgrade to Neutral on expectations of a likely FY26E guidance cut as comps remain listless and core operating margins erode (propped up by sale leaseback activity).
DECK: JEFFERIES UPGRADES TO BUY, GROWTH SLOWDOWN OVERSOLD
The firm views DECK’s MT guide (+HSD% revenue, roughly stable OM% in low-20%s, +LDD% EPS with buyback) as achievable and sees upside opportunity over 12+ months contingent on HOKA product innovation, where early signs are encouraging. The analyst notes shares now reflect a normalized growth outlook (P/E compressed from 33x to ~13x) and that management has multi-year visibility to sustain growth and hold margins flattish, contrary to fears of a margin step-down. HOKA stabilizing with re-acceleration potential from enhanced segmentation (Clifton Pro launched last week, Bondi ETA February) and lifestyle push leveraging UGG learnings, while UGG durability is underappreciated with +MSD% outlook achievable given diversification across products including men’s. International at 20%+ Y/Y underpins growth, oil-price normalization should support OM% upside, and 13% of market cap in cash supports downside.
PZZA: BOFA DOWNGRADES TO UNDERPERFORM, PT TO 34
The firm downgrades PZZA to Underperform with PO cut to 34 from 42 following CFO Ravi Thanawala’s departure to AEO, which the analyst reads as a signal that a rapid SSSG turn is unlikely — he wouldn’t have left after less than three years if a sharp turnaround were imminent, and the management disruption adds earnings unpredictability. Competitive intensity favors scale, with DPZ’s 10bn domestic system sales (vs PZZA’s 3.6bn) translating into materially better unit economics — the firm estimates DPZ average co-op EBITDA at 200K vs 140K for PZZA. The analyst cuts 2Q SSSG to -6.7% N.A. (from -6.4%) and 2.5% international (from 3.5%), with adj. EBITDA (ex SBC) trimmed to 199mm from 204mm (vs FY guide of 200 to 210mm).
SN: CANACCORD RAISES PT TO 185 ON SUMMER CHECKS, Q2 TRACKING AHEAD
Checks of 56 SN wholesale doors and 30 Ulta locations found 80% of surveyed stores reporting strong Shark & Ninja sales (68% in October) with zero stores reporting weak sales, corroborating domestic channel sales tracking +26% QTD through 6/27 (accelerating from +18% two weeks earlier, aided by +86% growth for the week ending 6/27 on an earlier Prime Day). Inventory came in slightly lighter at 61% well-stocked (69% in October), which the analyst attributes to demand rather than retailer caution. Ninja Swirl by CREAMi and Ninja CRISPi continue to see strong consumer response, Shark CryoGlow drew rave reviews (72% strong sales vs 55% in October and 54% last July), and both Shark ChillPill and SilkiPro are off to solid starts; weaker web traffic (Q2 down 24%) is dismissed as not apples-to-apples given last October’s website conversion. The firm raises Q2 estimates well above consensus, reiterates Buy, and lifts PT to 185 from 161.
Flagging SN insider sell after the close on Friday
CMG: OPPENHEIMER FLAGS ACTIONABLE LONG INTO 2Q, REITERATES 51 PT
The firm calls CMG an actionable long for the rest of the year with an improving setup into the 2Q26 print on July 29, arguing revisions have troughed after six consecutive quarters of cuts (Street ‘26E EPS down -28% cumulatively) and that risk/reward vs consensus is attractive for the first time since ‘24. The analyst sees an underappreciated build to mid-single-digit SSS exiting ‘26E as traffic traction sustains, pricing sequentially builds, High-Efficiency Equipment Package rollout accelerates (200-400bps lifts), April’s loyalty re-launch drives accretion, and catering expansion adds a driver into ‘27; ‘27E EPS of 1.40 (+22% growth) sits above consensus. Margins finally well-positioned for the first time since ‘24, with the analyst viewing Street’s ‘27E restaurant margin of 24.3% (+40bps) as too conservative and expecting a return to 40%+ flow-through.
CMG: MIZUHO RAISES PT TO 41 FROM 40, REITERATES OUTPERFORM ON Q2 CHECKS
Mizuho lifts CMG to 41 and reiterates Outperform, with the firm saying solid Q2 checks increase confidence in SSS growth trending toward 3% plus in Q4 and 2027. The analyst raises the Q2 SSS estimate to 1.7% from 1.1% versus consensus of 1.3%, driven entirely by incremental traffic. On a 3-year stack, Q2 traffic accelerated to 4.5% from Q1’s 3.7%, pointing to upside versus the firm’s Q3 and Q4 estimates of 2.5% and 2.8%. The analyst adds that CMG’s year-long cycle of lower margin revisions is “now in the rear-view mirror,” with 2026 and 2027 EPS moving to 1.13 and 1.36 from 1.12 and 1.33.
WING: BTIG MAINTAINS BUY AND 305 PT, CHECKS FLAG LOCAL AD LIFT
Checks over the past week suggest some franchisees are beginning to invest in local advertising — weekday specials, high-school team sponsorships, fundraising, and catering promotion — potentially spending an incremental 1.0% to 1.5% of sales, with the analyst estimating a 3% SSS lift needed to offset every 100bps of local ad spend. Traffic bottomed in March and continues to improve in 2Q on aggressive promotions, the World Cup, and the Smart Kitchen rollout, with sentiment lifting as immigration rhetoric subsides and gas prices moderate. Bloomberg Alternative data shows 2Q26 transactions still down HSD (~8%) but improved ~250bps sequentially vs 1Q, supporting the firm’s -5.5% SSS estimate given modest 1-2% pricing.
MAR: JEFFERIES REITERATES BUY, PT 417, TOP C-CORP PICK INTO 2Q
Jefferies keeps MAR as a top lodging C-Corp pick and reiterates Buy with a 417 target ahead of 2Q results. The firm models 2Q26 lodging revenue of 1,946M and adj. EBITDA of 1,533M, FY26 at 7,598M and 5,935M, and FY27 at 8,131M and 6,398M, with FY26 NUG held at 4% to 5% driven by conversions. The analyst notes MAR is a beneficiary of accelerating non-RevPAR fee streams, particularly co-branded credit cards, and sees a structural AI advantage from Bonvoy scale and data, supported by the CitizenM acquisition. Middle East recovery is pushed to a FY27 catalyst.
HLT: JEFFERIES RAISES PT TO 397 FROM 381, REITERATES BUY
Jefferies raises HLT to 397 and reiterates Buy, citing high conviction on execution and visibility through year-end. The firm sees NUG of 6% to 7% as achievable, with conversions at 30% to 40% of unit growth and Spark now above 20k rooms, supported by expanding European and Asian pipelines. The analyst flags valuation as the overhang, with the stock at historically elevated levels that could cap near-term upside after strong LTM performance.
H: JEFFERIES RAISES PT TO 196 FROM 193, MAINTAINS HOLD
Jefferies becomes incrementally more positive on H following the May analyst day, which framed gross fee growth of 9% to 13% CAGR, EBITDA growth of 11% to 16% and AFCF growth of 14% to 18%. The firm points to a distribution and pipeline mix roughly 70% weighted to Luxury and Upper Upscale, exposure to higher-income cohorts, all-inclusive strength and the ongoing asset-light transition.
WH: JEFFERIES RAISES PT TO 109 FROM 107, REITERATES BUY
Jefferies reiterates Buy on WH, calling the core algo of 4.0% to 4.5% NUG and 0% to 2% RevPAR intact, with non-RevPAR fee growth of 15% to 20% off a smaller base supporting 3% to 7% top-line growth across cycles. The analyst notes Economy chain scale rate improved 2.3% and 2.2% Y/Y in April and May, a tentative sign of inflection in the pressured lower end. Leisure is 70% of room mix and infrastructure spending has lifted midweek demand; loyalty penetration sits near 54% of occupancy.
COST: RBC CAPITAL INITIATES AT SECTOR PERFORM WITH 1000 TARGET
RBC Capital starts COST at Sector Perform with a 1,000 target, calling it one of the best stories in retail on the back of its model, merchandising and digital push. The firm sees modest margin expansion and high-single to low-double-digit annual EPS growth over the medium term, driven by improving e-commerce economics and ramping retail media, with tariff refunds funding typical reinvestment. The firm struggles with the path to significant upside as margin expansion normalizes and paid membership growth and renewal rates stay pressured near term.
RCL: STIFEL CALLS RECENT SELL-OFF A SIGNIFICANT BUYING OPPORTUNITY
Stifel argues the recent RCL sell-off creates a significant buying opportunity, with the firm saying any demand blip from geopolitical and virus concerns will not prove material given pent-up vacation demand. Channel checks show bookings and demand resilient through June, and the analyst says pricing fears appear baseless. Into the July 28 print, Stifel expects a slight beat on Q2 yield and EPS and a maintained midpoint on constant currency yield guidance, with qualitative commentary consistent with the last call. The firm flags that Middle East headwinds and Mediterranean impact imply the balance of 2026 tracks below prior guidance even with a Q2 beat, and it urges investors to focus on 2027, where industry-wide bookings are already strong.
MGM (+2% in the pre)
*In active talks to be taken private by People Inc (fmr IAC / Barry Diller) at $48.30/shr in cash, valuing MGM at ~$18B; People already owns 26.1%
*Board views the $48.30 as undervaluing the company
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EARNINGS CALENDAR
