Consumer Spec - Pre Market Wrap
COST (+) Beat, FIVE (-) Bar Too High, PVH (-) Top-Line Cut | Yardeni $8,250 Hold, Wolfe Momentum/SOX Narrow, Beige Book K-Shaped, IEEPA Tariff Refunds, Beer Demand -5.5%, MNST/KO Comments, VSXY +
Consumer stocks mixed in pre with some positive rotational flows driven by lower crude, AI selling and a solid monthly earnings print from COST (+2%). In terms of earnings, we see broad negative price action in FIVE (-11%) missing a very high expectations bar and PVH (-20%) guidance being outright disappointing.
In terms of analyst notes, very quiet today. MNST and KO get fresh Outperform reiterations on global runway (probably the best names in staples). Beer ugly: BofA flags Q2 volumes -5.5%, STZ gaining share, TAP lagging.
LULU reports post close where concerns are they 2Q top-line guidance could come in below.
MACRO & MARKETS
WMT (Walmart)’s CEO warned that elevated fuel costs are pressuring consumers, esp. at the low-end (Bloomberg)
INTERESTING MACRO CHARTS:
Same-store sales growth held steady for the week ending May 30, maintaining a robust pace of consumer spending
Goldman’s quantitative measure of sentiment around the consumer on earnings calls declined sequentially but remained around its historical average
Wage growth remained steady and below 3%
MARKET: YARDENI HOLDS 8,250 S&P 500 TARGET, CALLS ANY PULLBACK A BUYING OPPORTUNITY
Yardeni Research said any near-term S&P 500 pullback should be treated as a buying opportunity, maintaining its year-end target of 8,250. The index has rallied 19.1% since its March 30 bottom, led by a 44.5% surge in technology on what Yardeni dubs “Fabulous Earnings Momentum,” with forward earnings up 26.6% year-over-year through May. Still, the firm flagged near-term risks: it expects the FOMC to shift to a tightening bias and hike 25bp in July, ahead of consensus, with the two-year yield at 4.08% signaling tighter policy. It also cited executive warnings of an oil spike toward $150 and possible SpaceX IPO volatility.
MARKET: WOLFE SEES MOMENTUM EXTENDING GAINS WHILE SEMICONDUCTORS LEAD AND MARKET STAYS NARROW
Wolfe Research said momentum stocks are positioned to keep leading the market higher so long as semiconductors remain in leadership and broadening does not occur. Momentum has been the top-performing factor year-to-date by a wide margin, followed by three-month EPS-revision and liquidity factors. The firm characterized the momentum trade as synonymous with a narrow market, given the outsized returns from the tech-specific momentum factor, and said not all momentum is alike given the divergence tied to the AI-buildout theme. Wolfe added that if a U.S.–Iran resolution keeps slipping and trading stays choppy, momentum should continue to lead indices and sectors higher.
US/FED: EVERCORE ISI SAYS MAY BEIGE BOOK SHOWS INPUT-COST INFLATION, K-SHAPED CONSUMER, EARLY WAGE SECOND-ROUND RISK
Evercore ISI says the May Beige Book is broadly consistent with the macro data, with activity and prices ticking higher (businesses now reporting price increases at a “moderate to strong pace” vs. “mostly moderate” in April) as US-Iran war-driven energy costs push non-labor inputs above selling prices and compress margins. The analyst notes the more notable signal is on wages, with districts reporting “more frequent wage adjustments and cost-of-living increases” to offset fuel and household costs (citing Philadelphia, Cleveland, Richmond, Chicago examples), a potential second-round mechanism that, if it broadens, would likely require Fed tightening to prevent the energy shock from morphing into a more persistent inflationary shock, though near-term passthrough looks limited as firms are “temporarily absorbing higher costs to preserve customer demand.” On the consumer, the firm flags middle-income households now described as “squeezing more life out of every dollar,” alongside rising mortgage and consumer loan delinquencies, pointing to greater financial strain even as business 6-month growth outlooks held steady. Overall, the analyst adds, the report points to rising downside risks to spending and upside risks to inflation from a negative supply shock, consistent with the firm’s modal view that the Fed stays on hold for the remainder of the year.
CONSUMER STREET RESEARCH
Upgrades
No upgrades in the consumer sector today
Downgrades
Ollie’s Bargain Outlet (OLLI) Cut to Accumulate at Gordon Haskett
PVH (PVH) Cut to Inline at Evercore ISI; PT $79
Initiations
No initiations in the consumer sector today
EARNINGS REPORTS
COST +2%: MAY CORE COMP +8.0% BEAT BUT TRAFFIC DECELERATES
.May SSS (ex-gas/FX) of +8.0% came in above expectations (+6.8% cons) and accelerating from +7.8% in April. US comps (ex-gas) came in at +8.7%, above consensus at +7.0% and vs. +8.0% in April.
Negative side is that worldwide traffic decelerated at +3.9% in May (vs. +4.2% in April, +1.5% in March, and +3.0% in February), while overall global ticket (ex-gas/FX) increased an estimated +4.0%.
By category, the analyst adds Fresh Foods rose high-single-digits on meat and bakery, Food & Sundries grew mid-single-digits, and Non-Foods advanced high-single-digits led by jewelry, small appliances and home furnishings, while ancillary jumped to the high thirties on gas, pharmacy and hearing aids.
FIVE -10%: A BIG BEAT BUT SLIGHTLY BELOW THE HIGHEST OF EXPECTATIONS
Report was decent and FIVE delivered a big raise but buy-side had some even higher bogies than what they printed.
Feels like it will be an interesting debate (check brokers color below), given one of the best stories in retail at the moment, but an incredibly high bar.
Details: 1Q EPS of $2.22 vs Consensus $1.75, with the key being comps at +22.7% vs Consensus +17.8% (had heard some bulls as high as +25% though wouldn’t say that was where everyone was). Guides 2Q comps to +7-9%.
We see a divided Street response.
On the bull camp, Truist stayed positive, reiterating Buy and a $265 target, arguing the stock should not trade at 22x rapidly growing earnings with 10% of market cap in cash, and framing the selloff as a significant buying opportunity.
The bears conceded execution but flagged peaking growth. Mizuho (David Bellinger) cut its target to $225 from $240 at Neutral, noting investors may push back on the magnitude of the FY26 guidance raise given the untouched second half and the looming loss of last year’s pricing tailwind. Jefferies (Randal Konik) trimmed to $210 from $223 at Hold, conceding standout execution and raising estimates but warning the second-derivative growth is waning and the multiple should compress. Notably, Jefferies reversed last year’s preference, now favoring OLLI over FIVE on risk/reward, citing FIVE at 24x FY2 P/E versus Ollie’s Bargain Outlet (OLLI) at 16x. The common thread: trading cards and viral traffic are real, but lapping price increases and tough compares cap the upside multiple.
Goldman color on the results, moving to the cautious/neg camp:
“While we acknowledge that compares become more challenging from here, and sales are likely to slow as we move past the one-time trends (such as the squishy dumpling trend), we remain constructive on FIVE’s ability to continue its strong momentum.”
PVH -20%...ON TOP-LINE GUIDANCE CUT WHEN HOPES WERE FOR A POTENTIAL RAISE
PVH delivered a small beat and reaffirm on EPS, but an outright cut on top-line.
Details: 1Q EPS was $2.01 vs Consensus $1.79 on revenues about 100 bps above. They are reaffirming FY EPS and operating margin but are lowering FY revenues (constant F/X to “decrease” slightly vs prior flat to increase. On the revenue cut, said it is due to the challenging macro environment on its EMEA.
ISI negative on the report downgrading PVH from Outperform to In Line and cut PT target to $79 from $95. While first-quarter EPS of $2.01 topped Street’s $1.82, IS called it a low-quality update that leaves risk of further negative revisions in the second half. Firm flagged that PVH is among the only names in coverage embedding a one-time tariff-refund lift in its FY26 guide, adding 100bp to full-year EBIT margins; excluding it, EPS would be roughly $1.70 lower. The outlook also assumes a margin re-acceleration to roughly flat in the back half that he views as optimistic, while Middle East pressure is spreading across the broader EMEA business.
ANALYST RESEARCH & NEWS
VSXY: TD COWEN RAISES TARGET TO $75 ON AUR GAINS AND RAISED FY26; MAINTAINS HOLD
TD Cowen analyst Jonna Kim raised her price target on Victoria’s Secret to $75 from $50 while maintaining a Hold rating. The analyst highlighted strong brand execution, with product innovation and an effective marketing engine supporting durable demand. First-quarter upside was driven by average unit retail expansion, reflecting higher full-price sell-through, alongside double-digit-percentage gains in new customer growth. Second-quarter guidance came in above Street expectations and the full-year FY26 outlook was raised. Kim cautioned, however, that the recent sharp move in the stock limits near-term upside even as underlying momentum remains compelling, justifying the move higher in target but not a ratings upgrade.
RETAIL: MORGAN STANLEY SIZES IEEPA TARIFF REFUNDS AT UP TO 35% OF 26E EBIT FOR MOST EXPOSED NAMES
Morgan Stanley says IEEPA tariff refunds, paid to importers of record since May 12 after the Feb 20 SCOTUS ruling, will land largely in 2Q26 and 3Q26 and represent a tailwind of up to ~35% of ‘26e EBIT at BOBS, FND, CALY and ARHS, and ~15% at WSM, TGT, DLTR and GOLF.
The analyst notes broadliners WMT, COST and BJ are set to recycle the cash into lower prices (BJ already deployed ~$20m, offsetting ~50bps of 1Q margin pressure), with WMT and COST best positioned to convert that into traffic, while DLTR and LOW also lean toward price and GOLF/CALY prioritize flow-through; auto-parts names ORLY, AZO and AAP see little, sitting under Section 232 rather than IEEPA. The firm adds CALY, WSM, GOLF and BOBS screen largest as a share of US revenue (>3%) versus minimal benefit at W, ULTA, DG, AZO and ORLY, and flags that refunds on sold goods book immediately while those tied to inventory flow through COGS later, skewing recognition toward 2Q for broadlines/home improvement and 3Q for furniture/sporting goods. The analyst adds clear disclosure of refund size and timing will be key to reading underlying earnings power.
MNST: EVERCORE ISI REITERATES OUTPERFORM, $95 PT, MANAGEMENT ROUNDTABLE HIGHLIGHTS GLOBAL RUNWAY, INNOVATION, COKE SYSTEM LEVERAGE
Evercore ISI reiterates Outperform on Monster Beverage with a $95 PT (~41x C26 EPS of $2.30) following a roundtable with CEO Hilton Schlosberg, EMEA/OSP CEO Guy Carling, and APAC President Philippe Wothke, where the firm flags a long runway both domestically and abroad given Energy is just 19% of NARTD in the U.S. vs. 13% EMEA / 9% APAC / 8% LatAm, with all reported regions growing +DD% in 1Q26 and international now 45% of sales across 160 countries.
The analyst notes Asia per capita consumption is only 12 servings vs. 54 in the U.S. and 38 in Europe, with “gigantic opportunities” in China (Predator targeting non-English, non-carbonated factory consumers) and India (segmented approach: Monster on gaming, Predator on cricket), plus recent launches with Swire in Thailand and Pakistan (250M consumers unlocked) and a CCBJI vending agreement in Japan. The firm highlights deepening Coca-Cola system integration through RGM and market-specific November 1 pricing, a robust 2027 innovation calendar including Vanilla Shots in Fall 2026 and potential America 250 LTOs for July 4th, female-consumer initiatives (FLRT, Ultra White growing >50% YTD in Europe), and confidence in protecting margins via disciplined SG&A and laddered aluminum hedging, with November pricing offsetting a 1% 1Q GM% headwind from aluminum and ongoing pressure expected to stay modest.
STZ/BUD/TAP: BOFA FLAGS Q2 BEER CONSUMPTION DOWN 5.5%; STZ GAINS SHARE, TAP LAGS
Bank of America, reporting from the Beer Marketer’s Insights Spring Conference, said beer consumption trends deteriorated in the second quarter after early-year improvement. Consumption fell 1.6% year-over-year in Q1—better than the five-year CAGR decline of 3.1%—before worsening to down 5.5% through mid-May on NielsenIQ data, a 260bp deceleration that speakers tied to higher gas prices squeezing disposable income. On year-to-date volume share, Constellation Brands (STZ) gained 63bp and Anheuser-Busch InBev (BUD) added 30bp, while Molson Coors (TAP) lost 54bp. The 2025 shipments of 183 million barrels marked a 36-year low. BUD’s Michelob Ultra held its spot as the top beer brand by volume.
KO: EVERCORE ISI REITERATES OUTPERFORM, $88 PT, CFO FIRESIDE FLAGS SYSTEM STRENGTH, MARGIN CONFIDENCE, IMPROVED MNST DIALOGUE
Evercore ISI reiterates Outperform on Coca-Cola with an $88 PT (~27x 2026 EPS) following a fireside with President and CFO John Murphy, who flagged 20 consecutive quarters of value share gains and a “seamless” CEO transition to Henrique, who is “demanding more from more markets” and bringing fresh energy to the franchise, with RGM now layered with AI viewed as a “growth enabler” rather than cost-reduction tool.
The analyst notes management is rebalancing from the post-Covid price-led model back toward an optimal volume/price/mix mix after conservative elasticity assumptions allowed KO to take pricing without impairing relevance, while the firm reiterates confidence in the ~60 bps of margin expansion averaged since 2017/2018 continuing via three levers (top-line quality including premiumization and higher-margin categories like Core Power, the concentrate model’s cost advantage, and cross-enterprise procurement servicing >90% of the bottling system). Murphy “feels good” about North America despite consumer pressure, framing the challenge for pressured lower-income consumers as being the “last guy to go,” and characterized the MNST relationship as in a “much stronger spot” with “really good dialogue underway” on legacy issues and a compounding-loop opportunity for the system. The analyst adds capital allocation priorities are unchanged with investment behind the business and dividend growth “non-negotiable,” debt reduction offering the most near-term optionality, and Murphy stating KO is best positioned to handle whatever outcome on the pending tax case; risks include macro, FX, GLP-1 overhang, pricing-discipline breakdown, and the tax case.
EARNINGS CALENDAR
