Consumer Spec - Pre Market Wrap
8:22 AMClaude responded: DLTR (+), KSS (+), BBY (+), HRL (+), BURL (-) Reported | Gen Z Wellness vs Alcohol, Housing Affordability Drag, DKS Upgrade & Defenses, CZR/Fertitta Deal, WYNN
Consumer pre-market should trade well today on multiple positive earnings reports. Earnings are the highlight today — DLTR +12% on an EPS beat and raised FY guide, KSS +12% clearing a low bar, BBY +8% with May running +high-singles, and HRL +7% on resilient margins. DKS is the standout, with JPMorgan, Morgan Stanley and DA Davidson all defending it post-print and the World Cup teed up as a catalyst. The wrinkle: BURL -5% as comps missed whisper bogeys.
Bigger picture, Gen Z trading drinks for gyms keeps me cautious on alcohol — that one feels structural, not faddish.
MACRO & MARKETS
GYM > DRINKS: RISING TREND OF WELLNESS AND A MORE HEALTHY LIFESTYLE
Gen Z is quickly pulling back on alcohol, both socially and professionally, and shifting spend toward gyms and other activities.
That’s incrementally bearish for the alcohol complex (SAM, InBev, Diageo, etc.).
Importantly, this isn’t a short-term fad — as Gen Z moves into prime earning years, the trend likely has legs.
Good for health and longevity… not great for beverage demand.
This was the 2nd most read story on Bloomberg globally yesterday.
HOUSING AFFORDABILITY HANGOVER KEEPS PRESSURE ON CONSUMER SPENDING
Rising mortgage rates have stalled a nascent improvement in housing affordability, with buyers now allocating 42% of their incomes to housing costs. Elevated housing costs are one of the key factors in the K-Shaped consumer economy.
It also comes into play the fact that median age of a US home is a record 44 years, leading to vast and rapidly increasing maintenance and modernization costs.
Reads + for HD, LOW and housing maintenance related businesses
The ratio of the equal-weighted consumer discretionary index to the S&P 500 has fallen below the lows seen during the global financial crisis.
What is interesting from this chart is how this downtrend started to accelerate after 2022 at the same time that housing affordability started to inflect higher
KEY QUOTES ON MACRO & STATE OF THE CONSUMER FROM ANF, DKS, BBWI AND CPRI: OVERALL CONSTRUCTIVE COMMENTS
Abercrombie (ANF):
On Regional Disruption: While growth continued in the Americas, management pointed to economic and geopolitical friction elsewhere: “EMEA sales declined by 10% due to regional conflicts, particularly affecting the Middle East“.
On Discretionary Spending: Despite “macroeconomic uncertainty continuing to pressure U.S. discretionary spending,” the company reported riding “strong demand for its apparel”.
On Consumer Resilience: Analysts noted that the company’s strategy allows it to “attract both cost-conscious consumers and a more affluent clientele whose spending remains dynamic”
Dicks Sports (DKS):
Steady Demand & Resilience:
CEO Lauren Hobart noted, “We are seeing strength with our consumer across the board. Our consumer is responding to our assortment. They’re responding to the athlete experience, and we’re seeing growth”.
Executives reported they see “no signs of trading down across income demographics” as of the first quarter of 2026.
Performance vs. Macro Headwinds:
While acknowledging “macroeconomic uncertainties” such as inflation and potential tariff pressures, management remains confident in their long-term trajectory.
The company reported that for their core customer base, “promotional activity hasn’t been an enormous factor”.
Consumer Shift to Premium:
Management noted that demand is consolidating around “premium experiences, specialized communities, and lifestyle-driven brands”. This has supported their investment in high-end store formats like House of Sport.
Bath & Body Works (BBWI)
Challenging Backdrop: CEO Daniel Heaf noted that the company’s performance came “amid a challenging macro backdrop”.
Economic Headwinds: Management cited “potential headwinds from broader macroeconomic conditions” as a reason for their cautious outlook.
Resilient Engagement: Despite economic pressure, management observed that “customer engagement remained resilient, particularly through loyalty programs”.
Cautious Spending: Analysts and management noted that full-year 2026 guidance reflects “cautious consumer spending” and the potential for a “softer consumer response”.
Shift in Preferences: There is an ongoing “shift in consumer preferences toward wellness and personal care products” and a need for products that are “benefit-led” rather than just seasonal.
Capri Holdings (CPRI):
Specific Brand Momentum: Jimmy Choo’s strategic actions are attracting “new and younger customers,” driving tangible growth in the back half of the year.
Management commentary highlighted a cautious but optimistic approach to the broader economic landscape:
Wholesale & Department Stores: “The trajectory of certain stores, certain of our big partner stores, is actually up. We saw some of our partner department stores have increases... which is exactly like our full-price business... is trending as well”
STRETCHED CONSUMER DATAPOINT:
CONSUMER STREET RESEARCH
Upgrades
JPMorgan Upgrade Dick’s Sporting Goods (DKS) to Outperform
Downgrades
Guggenheim Downgrade Jack in the Box (JACK) to Neutral
Initiations
No initiations in consumer sector today
EARNINGS REPORTS
Positive overall consumer earnings reports today. Expect sector to trade positive.
DLTR +12% : Q1 EPS BEATS BY 19c, RAISES FY PROFIT GUIDANCE
Strong report, expecting the stock to move higher today.
Dollar Tree posted Q1 EPS of $1.74 versus the $1.55 consensus on revenue of $4.97B, in line with estimates, and raised its FY26 adjusted EPS view to $6.70–$7.10 (prior $6.50–$6.90) on resilient demand for affordable essentials from budget-conscious shoppers;
Gross margin expanded 120bps, aided by easing freight and the multi-price strategy ($1.25/$3/$5+) offsetting tariffs and supply-chain costs. The guide excludes ~$110mn of tariff refunds through May 26, and net sales guidance was maintained.
Overall, expectations were mixed into the print and stock recently underperformed -30% since late Feb on inflation concerns. Options implied 8.6% move, SI 7%.
Barclays on the results:
Q1 comps were in line with guidance but better than feared in the market (and reflected in the stock). Traffic was down but improved sequentially, supporting the 2H inflection target. Margins came in better. Refunds starting to flow in Q2. EPS moving up, not down.
Q1 sales were healthy and better than expected with comps +3.5%, in line with guidance of +3-4% and accelerating on a two-year basis.
Traffic -1.0% compared to -1.5% in Q4 (also better on a two-year basis) vs. our concerns that traffic may have slowed sequentially. This decline seems quite manageable and consistent (arguably better) with prior periods of price increases, giving us confidence that traffic can inflect positively in 2H.
Ticket +4.5% compared to +6.3% in Q4, largely reflecting comparisons against the acceleration in price increases a year ago. This seems supportive of average ticket up around +3% for the year based on our estimates.
Goldman consumer spec:
While there will remain a debate about negative traffic (vs higher ticket), this quarter and the 2Q guide clears a pretty low hurdle.
KSS +12%: TOP AND BOTTOM LINE BEAT VS. LOW BAR, WITH SHARES -36% YTD
EPS beat (-$0.13 vs. -$0.19 cons) on revs of $3.0B (vs. $3.0B cons). Comps -1.1% (vs. -1.7% cons).
Guidance reaffirmed for FY27 with EPS $1.00-1.60 vs $1.36 cons) on comps of -2% to flat (vs. -0.5% cons). Overall, better results than fairly low expectations, but note the stock has given back the significant gains from the better 4Q back in Nov (-48% since) as the recovery has remained slow and inconsistent
CEO: “We are pleased with our start to 2026. Our key initiatives continue to drive progressive improvements to the business, resulting in our best comparable sales performance in over four years. In addition, we continue to manage the business with great discipline leading to strong expense management, cleaner inventories, and an improved balance sheet.”
BBY +8%: TOP-LINE RESULT BETTER THAN EXPECTED, WITH SOLID START NOTED SO FAR IN 2Q
1Q EPS of $1.28 vs Consensus $1.23, with revenues 1% better and comps of +2% vs Consensus +0.9% (expectation was +1-1.5%). Importantly, said May MTD is running +high-singles, a big acceleration.
However, they note they expect it to finish just +1% for the full 2Q, given the tough lap ahead in Juene. Reaffirming the guide across the board.
Jefferies first takes on the results:
BBY delivered a ~5% beat on earnings this AM driven by better sales and margins, though we attribute shares sharply higher in the pre-market to commentary that month-to-date comp sales for May are +HSD% to kick off F’2Q. We expect attention to the headwind management is embedding for the quarter tied to the lap of last year’s very successful gaming launch in June (Entertainment comp +37.5% last 2Q), which influences their plan of 1% comps.
Goldman consumer specialist:
Positive results though expect bears to remain engaged, given the tough compares ahead
BURL -5%: COMPS MISSED THE BOGEY
While EPS and flow through and the 2Q EPS guide is very solid, would expect to hear some pushback on the +6% comp.
While above consensus, it fell short of the +7-8% expectations of buyside bogeys into the print.
2Q EPS of $2.10 vs Consensus $1.80, with revenues 170 bps above. Comps were +6% vs Consensus +4.6% but bogey seemed to be in the +7-8% range. Gross margins beta by 60 bps. The positive is they guided 2Q well, with EPS above at $2.05-$2.20 (Consensus $1.93) on comps of +1-3% (Consensus +2%). Raising all aspects of the guide, with EPS, comps, and margins all moving higher.
HRL +7%: Q2 EPS BEATS AND REAFFIRM GUIDANCE; STRONG MARGINS
Hormel Foods reported Q2 EPS of $0.40, 4c above the $0.36 estimate, on revenue of $2.97B versus $2.96B consensus. The company guides FY26 EPS to $1.43–$1.51 (consensus $1.45) and revenue to $12.2–$12.5B (consensus $12.29B).
Oppenheimer positive on the results:
Earlier this morning, HRL reported better than feared Q2:26 results and reaffirmed FY26 targets. Adjusted EPS of $0.40 easily topped a Street estimate of $0.35. Organic sales increased 3% with positive growth across all segments with Foodservice and International representing clear bright spots registering growth of 7% and 5%, respectively. Even with increased cost headwinds, management actually reaffirmed guidance, which we believe will be well received by investors today. HRL remains on our radar. From here, we are focused on management’s efforts to ramp toward longer- term targets of 2-3% organic sales growth and 5-7% operating profit growth.
ANALYST RESEARCH & NEWS
Multiple brokers defending DKS today..
DKS: JPMORGAN UPGRADES DICK’S SPORTING, WITH Q1 SUPPORTING THE BULL CASE
JPMorgan upgraded Dick’s Sporting to Overweight from Neutral with a price target of $270, up from $240. The company’s fiscal Q1 report provides “strong support for the bull case,” the analyst tells investors in a research note. The firm says Foot Locker flipped to positive comps in the quarter. “We are a warm weekend away from the bears flipped to bulls,” contends JPMorgan. The firm sees the World Cup as an additional catalyst for Dick’s shares.
DKS: MORGAN STANLEY REITERATE OW, PT RAISED TO $270
Morgan Stanley reiterates Overweight and raises its DKS PT to $270 (16.5x ‘27e P/E), implying 23% upside, with risk/reward positively skewed at 50%/18% bull/bear. The firm says core DICK’s margin is pressured in 1H26e by front-loaded World Cup marketing and long-term SG&A investments, but topline is reaccelerating, with 1Q26 comps of +6.0% (the strongest in five quarters, +5.5% ticket/+0.5% traffic) and operating leverage returning in 2H26e; it models ~4bps of FY26e operating margin expansion to 11.2%. The analyst adds Foot Locker is finding its stride, with the U.S. banner (>600 stores) comping +6.4% and ‘Fast Break’ conversions expanding to ~100 from 10 at 4Q26-end and on track for ~250 by BTS, lifting the ‘27e segment margin estimate to 3.2% from 2.3%. New adjusted EPS estimates are $14.06/$16.32 for ‘26e/’27e (vs $14.33/$15.38 prior), with consolidated comps of 3.2%/3.0%.
DKS: DA DAVIDSON REITERATE BUY, $260 PT, WEAKNESS A BUYING OPPORTUNITY
DA Davidson’s Michael Baker reiterates Buy and a $260 PT after a quarter where most key metrics beat consensus, with callback color confirming traction in the Fast Break initiative and the broader Foot Locker turnaround. The firm says core-business commentary reinforces DKS as a meaningful share taker in a growing industry, and frames current margin pressure as short-term, investment-driven spend-back of upside that should ease in the back half. With shares giving back outperformance on the lack of margin flow-through and still trading at a discount, the analyst expects the weakness “will be bought.” PT is based on a conservative 16x against the firm’s 2027 EPS estimate.
CL: MORGAN STANLEY REITERATE OW TOP PICK, $100 PT, ST OSG UPSIDE ABOVE CONSENSUS
Morgan Stanley reiterates Overweight and Top Pick on Colgate with a $100 PT, citing a near-term organic sales growth re-acceleration above consensus in 2Q/3Q layered on favorable long-term drivers and superior relative EPS visibility. The firm says implied +60/+40bps OSG upside over the next two quarters comes merely from holding 1Q’s OSG constant and adding back transitory drags, supported by rebounding US scanner data, easy comps, volume inflection and pricing power that matters more in a post-Iran-conflict higher-cost environment. The analyst notes structural LT OSG drivers should keep CL growth above peers and return OSG to 3–4%, aided by its emerging-markets skew (45% of sales vs peers’ 22%), durable pet drivers and rebounding oral care. The analyst adds EPS visibility is superior given conservative $110/bbl oil guidance (vs peers $90–100, spot ~$96) plus favorable FX, and sees room for further multiple expansion despite a ~14% YTD run, with CL still ~1 standard deviation below its long-term relative valuation vs the S&P 500.
ANF: ABERCROMBIE & FITCH PRICE TARGET RAISED TO $110 FROM $107 AT JPMORGAN
JPMorgan raised the firm’s price target on Abercrombie & Fitch to $110 from $107 and keeps a Neutral rating on the shares. The firm updated the company’s model post the earnings beat in fiscal Q1.
JACK: DOWNGRADE TO NEUTRAL ON LEVERAGE PRESSURE, PT REMOVED
Guggenheim’s Gregory Francfort downgrades JACK to Neutral from Buy and removes his price target, flagging a tenuous balance sheet with $230mn of equity behind $1.6bn of debt on roughly $225mn of EBITDA. The firm notes the company two weeks ago replaced CEO Lance Tucker on an interim basis with Board Chair Mark King, who has a proven track record at Taco Bell and TaylorMade. The analyst adds that the leverage position will make a turnaround of the core Jack in the Box brand difficult to execute.
WING: BTIG REITERATE BUY, $305 PT, CLUB WINGSTOP LOYALTY LAUNCHES AHEAD OF WORLD CUP
BTIG reiterates Buy and a $305 PT after Wingstop launched its long-anticipated Club Wingstop loyalty program, a spend-based scheme earning 10 points per $1 with redemptions across 20+ menu items, from dips at 150 points to 20 Classic Wings at 3,300. The firm says the earnings structure is standard but redemption options are notably wider, and the program skews more experience-driven than peers via early flavor access, points sharing, merchandise and events; reward value is “remarkably” consistent with competing brands, likely by design. The analyst notes loyalty benefits will take time to accrue but have been a proven industry sales driver, and is encouraged by the timing ahead of the World Cup. With an estimated $25–$30 average check, customers can earn rewards after a single visit.
CPRI: PT CUT TO $22 AT RAYMOND JAMES, OUTPERFORM MAINTAINED
Raymond James’ Rick Patel lowers his Capri PT to $22 from $24 while keeping an Outperform, after an F4Q26 EPS beat on IEEPA tariff refunds despite a slight revenue miss. The firm maintains a constructive view, citing positive Michael Kors full-price comps, higher AUR, international growth in Europe and APAC, and new product resonance, with most pain points self-help driven (MK Outlets/reduced Daigou, lower off-price wholesale exposure). The analyst sees CPRI tracking in line with guidance and a stronger F2H as promo pullbacks and Daigou headwinds ease, driving a positive revenue inflection. FY27 EBIT% came in above the Street, and the analyst views P/E as attractive at 8.5x (5-yr avg 10x) against an estimated FY26–FY28 EBIT CAGR of +35% and EPS of +27%.
CZR +2%: FERTITTA ENTERTAINMENT TO ACQUIRE CAESARS ENTERTAINMENT FOR $31.00/SHARE IN CASH
Worth looking at WYNN -1%...as Fertitta owns 12% of company per latest filings.
Deal valued at about $17.6 billion, including the assumption of approximately $11.9 billion of Caesars’ outstanding debt. That’s a 7% Premium to last and 49% Premium to 02/25.
Notables: Go-Shop Period Until July 11th // The proposed transaction is not subject to a financing condition. The transaction will be financed through a combination of equity contributed by Fertitta Entertainment, assumed Caesars’ debt, and new committed debt financing arranged by a group consisting of 10 banks. // CZR SH Approval // Carano family, which owns approximately 5% of the outstanding shares of Caesars Entertainment common stock, has agreed to roll a portion of their equity interests into Fertitta Entertainment. PR: Link.
AAL (American Airlines)/UAL (United Airlines) – both companies spoke at the Bernstein conf. on Wed, and said demand remains solid despite rising fuel costs (Bloomberg)
Auto sales: auto OEMs don’t expect sales of new vehicles in the US to return to the ~17M pre-COVID annual level until the end of this decade or later (WSJ)
NKE (Nike) is the subject of a neg. profile article in Barron’s, w/the report warning that the valuation is far from cheap while the firm’s problems might “run deeper” than most realize (Barron’s)
EARNINGS CALENDAR
