Consumer Spec Pre-Market Wrap
HD (-) Pre-Mkt, AS (+) Pre | HD Comments, AS Comments, MNST/CELH Numerator, COST Pre, ROST/TJX/BURL Constructive, DKS Pre, ELF Beauty Derate, EL/Puig M&A, Momentum Unwind, ADP Print, GOLF Comments
A defensive-tilted tape sets up as U.S. futures fade on chip weakness and lingering inflation angst, with Brent above $110 and the 10-year easing to 4.587% after Monday’s spike.
Earnings the focus in consumer this morning with a solid beat from AS (+3%) but we’ll see if holds while HD (unch) looks more inline and ultimately stays driven by housing outlook / rates. Overall very quiet in terms of research, JPMorgan trimmed CPB and SJM in packaged food, Wolfe cut DG, Piper slashed ELF, UBS launched PPC at Neutral, and EL confirmed Puig talks continue.
STREET RESEARCH
Upgrades
None
Downgrades
None
Initiations
Pilgrim’s Pride (PPC) Reinstated Neutral at UBS; PT $30
Earnings
HD -0.6% 1Q26 — In-line print, FY guide reiterated; comps miss Street but bracket buyside.
GS Consumer desk summarize well:
Ultimately there was a slight relief rally in pre to start with shares at YTD lows coming in but don’t think much changes here; stock likely continues to trade off the housing outlook going forward where interest rates remain key
Morgan Stanley:
Our initial take on HD’s Q1'26 results and unchanged guidance is more of the same. The housing backdrop appears static and HD continues to execute well in a relatively “growthless” environment. One could pick at the slight deceleration in Q1'26 transactions and lower quality EPS (GM missing and SG&A driving the beat), but 1) transactions are stable from a high level and could have been impacted by weather, especially in April, 2) the consensus mis-modeled Q1'26 GM – which means the complexion of the quarter was in-line, and 3) at this stage of the story and at this multiple (~19.5x NTM P/E), it's all about the macro.
1. Key Takeaways
Guide reiterated across the board — FY26 comps flat to +2%, revenue $168.8-172.1B (+2.5-4.5%), GM 33.1%, adj EBIT margin 12.8-13.0%, adj EPS flat to +4%, capex ~2.5% of sales, 15 new stores. No revisions despite elevated consumer uncertainty and housing affordability pressures.
Demand “soft yet consistent” — underlying trends broadly in line with ‘25 levels; U.S. comps positive for the sixth straight quarter but two-year stack decelerated ~100 bps to +0.6% from +1.6% in 4Q.
Inventory spread narrowed meaningfully — inventory +5.9% vs sales +4.8%, a sharp improvement from the ~1,400 bp gap in 4Q. Cleaner setup into 2H.
Ticket > transactions, with planned >3% like-for-like inflation — ticket +2.2-2.3%, transactions -0.9% to -1.3%. Inflation is doing the heavy lifting; underlying unit demand still negative.
Macro overhang persists — housing affordability, rates, and the Iran conflict dragging into QTD are the key incremental concerns for the call.
Key call focus: QTD trends (compare steps up ~130 bps q/q), 2H setup as compares ease, SRS/roofing contribution, Mingledorff’s contribution, GM% bridge given higher energy costs, and Complex Pro scaling.
2. KPIs vs. Street
Total Comps: +0.6% vs Street +0.8% (MISS), last q +1.5%. Includes ~55 bps FX tailwind; ex-FX roughly flat. SRS implied as a drag.
U.S. Comps: +0.4%, last q +1.6%. Positive sixth straight quarter; bracketed buyside expectations.
Ticket vs. Traffic: Avg ticket $92.76, +2.2-2.3% y/y; transactions 391mm, -0.9% to -1.3% y/y. Like-for-like inflation planned >3%.
Revenue: Ahead of Street (exact print not disclosed in the takes); FY26 guide reiterated at $168.8-172.1B.
Gross Margin: 33.0% vs Street 33.2% (MISS), -77 bps y/y. FY guide held at 33.1%.
SG&A %: 19.1% vs Street 19.4% (BEAT).
EBIT Margin: 12.3% vs Street 12.1% (BEAT) — SG&A leverage offset GM miss. FY adj EBIT margin guide 12.8-13.0% reiterated.
Adj EPS: $3.43 vs Street $3.41 (BEAT); hit high-end of mgmt’s MSD% decline guide. FY26 guide flat to +4% = $14.69-$15.28.
Inventory: +5.9% vs sales +4.8% — spread compressed dramatically from the ~1,400 bp gap in 4Q. Materially cleaner.
Capex / Stores: ~2.5% of sales (~$4.23B), 15 new stores — both unchanged.
3. Bull vs. Bear Debate
Bulls view HD as the highest-quality way to play an eventual housing/R&R recovery, with a defensible Pro ecosystem, SRS/Complex Pro optionality, and best-in-class returns on capital. The thesis is that the cycle low is roughly in: U.S. comps have been positive six straight quarters, two-year stacks are stabilizing, and the company is laying track (Complex Pro, next-gen supply chain, Mingledorff’s) that should drive structurally higher productivity and SG&A leverage when housing turnover normalizes. Mgmt holding the FY guide intact through a 1Q with elevated consumer uncertainty, soft transactions, and energy cost pressure is itself a vote of confidence.
Bears see a multi-year R&R recession with no clear catalyst, where HD’s ~24x forward P/E embeds a recovery that keeps getting pushed out. Transactions remain negative, the >3% planned inflation is masking weaker underlying volumes, two-year stacks are decelerating (+0.3% from +1.2%), and the FY guide effectively requires a 2H acceleration that hinges on easier compares and Complex Pro scaling — both execution-dependent. Housing turnover is at multi-decade lows, mortgage rates remain elevated, and tariff/energy/labor cost pressures are still flowing through GM (-77 bps y/y in 1Q).
AS +3.7% : 1Q BEAT, FY GUIDE RAISED ACROSS THE BOARD, F2Q ABOVE CONSENSUS
Would expect follow-thru more in line with the 8% expect options move, despite weaker mkt dynamics this am.
AS posted +26% FXc revenue growth (Technical Apparel +28%, Outdoor +33%, Ball & Racquet +10%), beat F1Q EPS by 7c, raised FY EPS by 8c at midpoint, lifted FY revenue guide from 16-18% to 20-22%, and guided F2Q above consensus.
By region, Americas held at +18% for the third straight quarter, EMEA accelerated to +21%, and China stayed in the 40s at +45%.
Bank of America views AS as “best house on a challenged block” with positioning still long despite the stock being down 18% since last print, and notes AS has raised FY EPS guidance every eligible quarter (typically by less than the beat) and FY revenue guidance every eligible quarter except May 2024.
Analyst Actions
MNST, CELH: JPM FLAGS APRIL NUMERATOR SOFTENING
JPM says energy drink category buy rate decelerated -354bps sequentially to +15% YoY in April, snapping four months of acceleration as purchase frequency rolled to flat YoY while spend per trip held +5% for the 21st straight month. On MNST, the firm notes Numerator projected sales decelerated -499bps to +17% YoY (NielsenIQ corroborates at +12.6% L13W, -250bps decel), though household penetration hit a new high of 32.4%; Neutral rating holds.
The analyst adds CELH Numerator softened -546bps to +17% but NielsenIQ shows +24.1%, with Celsius brand itself barely growing (+1% Numerator, +3% NielsenIQ) and Alani Nu carrying the load at +90%/+80%. Alani Nu buy rate +26% YoY was second only to Bloom despite a -316bps seq decel, with household penetration at an ATH 15.3%, while Celsius household penetration was negative YoY for a third straight month; KDP’s C4 and GHOST are inflecting sequentially.
COST: OPPENHEIMER LIFTS PT TO $1,160 FROM $1,100, REITERATES OUTPERFORM AND TOP PICK STATUS
Oppenheimer’s Rupesh Parikh raised the Costco price target to $1,160 from $1,100 while maintaining Outperform ahead of the 5/28 print, reiterating COST as the firm’s top pick. With shares approaching the prior $1,100 PT, the analyst sees risk of transitory fuel-related margin headwinds contributing to a modest EPS shortfall this quarter, but maintains conviction in the outperformance case. Valuation is no longer discounted, but defensive characteristics of the membership model and Costco’s superior omni-channel and fuel value proposition should continue to drive outsized share gains. Parikh also flagged the potential for a special dividend and/or stock split as positive catalysts.
ROST, TJX, BURL: GS CONSTRUCTIVE INTO F1Q, ROST STRONGEST MOMENTUM
The firm stays constructive on off-price into F1Q prints, with channel checks pointing to broadly healthy trends across the group and ROST leading peers. The analyst notes store traffic improved sequentially in April after March moderation, and credit card data shows robust growth at ROST, sequential acceleration at BURL, and positive trends at TJX. GIR continues to view the sector as structurally positioned for trade-down activity and a value-oriented consumer, while flagging rising freight and transportation costs as the key watch item into 2H26.
DG: WOLFE CUTS PT TO $135 FROM $157, MAINTAINS OUTPERFORM ON 2Q CAUTION
Wolfe Research’s Spencer Hanus cut the Dollar General price target to $135 from $157 while maintaining Outperform. The analyst noted that Q1 SSS appear roughly in-line, but expressed caution on the start to Q2 as data has softened. Freight costs are flagged as an incremental headwind, and promotional activity screened high in store checks.
While Wolfe characterizes the initial FY guide as conservative, the firm sees increased risks to the outlook.
ELF: PIPER SANDLER LOWERS PT TO $60 FROM $85, MAINTAINS NEUTRAL ON BEAUTY DERATING
Piper Sandler lowered ELF's PT to $60 from $85 and keeps Neutral ahead of the print, with the firm flagging FY27 guide as the bigger focus over core ELF sales.
The analyst notes ELF will lap the Q2 consumption/shipment disconnect, which presents an opportunity, while simultaneously lapping the $1 price increase starting August 1. Piper adds rhode goes against the Sephora launch in early September, though the brand remains healthy and is scaling new distribution.
GOLF: GUGGENHEIM RAISES PT TO $97 FROM $95, MAINTAINS NEUTRAL POST-MANAGEMENT VISIT
Guggenheim’s Gregory Miller raised the Acushnet price target to $97 from $95 following an investor meeting with management and a ball plant visit, while maintaining Neutral. The analyst came away incrementally positive on the “recession resilient” player base and several company self-help efforts, and believes GOLF oversold post-Q1 earnings on an unchanged FY guide despite the company’s historical practice of not updating FY guidance at Q1.
Guggenheim raised 2026E Adjusted EBITDA to $433M from $429M and EPS to $3.79 from $3.76, while 2027E EBITDA moves modestly to $461M from $462M. The PT is based on an unchanged 14.0x EBITDA multiple on 2027 estimates.
DKS: UBS PREVIEWS 1Q BEAT, REITERATES BUY AND $275 PT
UBS previews DKS 1Q with core comp modeled at 4.0% vs Street 3.3% (House of Sport ~150bps, underlying ex-HoS ~2.5%) and Foot Locker gross margin at 29.9% vs consensus 27.2%, the biggest delta in the model driven by better merchandising and Fast Break early reads, with FL operating income of $11mm vs Street losses. The firm models combined 1Q EPS of $2.90 vs consensus $2.86, noting Street is ahead on DKS standalone ($3.12 vs $3.27) but FL is the upside driver. The analyst expects full-year guide ($22.1–22.4bn sales, $13.50–14.50 EPS) reiterated with a possible $0.05–0.10 midpoint lift on a clean beat; UBS sits at $14.00 vs Street $14.25 and flags World Cup (June 11), Fast Break ramp to 250 stores by BTS, and easy FL profitability comps in 4Q as the near-term catalyst stack. Valuation ~15x CY26E with FY27E at $16.75 implies 30%+ upside to the $275 PT; the analyst frames 1Q as the most pressured quarter with a clean 2H setup.
PPC: UBS INITIATES AT NEUTRAL WITH $30 PT ON 2026 MARGIN COMPRESSION CONCERNS
While PPC is down 28% YTD, UBS expects poor earnings momentum into 2026 to prevent a near-term recovery despite better sustainable margins longer term. The analyst forecasts stronger U.S. poultry production in 2026 (+2.5% y/y) and globally (+2.7% y/y ex-U.S.), which combined with higher corn prices drives material margin compression — 2026E U.S. EBITDA margins compressing to 9.1% (low-to-mid cycle) from a strong 14.8% in 2025. UBS sees limited downside with the stock at the low end of its 5.5x–7.5x historical range.
Macro & News
ADP WEEKLY EMPLOYMENT: 42.250K, LAST 33.0K
MOMENTUM: WORST 2-DAY UNWIND SINCE 2022, LOSERS BID, WINNERS SOLD
Goldman Sachs flags momentum’s worst two-day selloff since 2022, with back-to-back 5%+ unwinds (also a first since 2022) as GSXULMOM Past Losers outperform and GSXUHMOM Winners sell off. GS notes that across all prior >5% momentum drawdowns, the short leg has outperformed the market, and the team continues to favor buying the losers to manage unwind risk.
EL: CEO CONFIRMS PUIG COMBINATION TALKS CONTINUE BUT NO DEAL ANNOUNCEMENT IS READY YET
Estée Lauder CEO Stéphane de La Faverie confirmed at the FT Business of Luxury Summit in Apulia that discussions with Puig regarding a potential combination remain underway, though no announcement is ready. The two companies disclosed in March they were in tie-up talks. A combination would bring Tom Ford, Carolina Herrera, Rabanne, Jean Paul Gaultier, and Clinique under one roof, creating the world’s largest premium beauty player. De La Faverie noted organic growth remains the priority as a marker of brand desirability, but emphasized inorganic growth is needed for new geographies, diversification, and new categories. The continued M&A optionality represents a key support for the EL narrative against a backdrop of prestige beauty pressure.