Consumer Spec - Pre Market Wrap
CPB (+) Pre | CROX Upgrade Baird PT $150, CAR Upgrade Barclays, FIVE Comments, BURL/TJX Off-Price Share Shift, HD/LOW DIY Negative, VSXY CFO Meeting, GIS Sell PT Cut, BBY Meta
Consumer tape opens mixed with risk-off lingering from Friday's Nasdaq drawdown, though Iran's overnight declaration of an end to military operations against Israel takes pressure off oil and may support a discretionary bid. CPB tops Q3 by a penny with revenue ahead and reaffirms FY26 guide despite top-line softness — shares +3% pre-market, though the report looks lower quality.
In terms of research, off-price stays the structural winner with UBS Evidence Lab reinforcing TJX/BURL Buys against the Macy's complex. CROX catches a Baird upgrade to Outperform PT $150 on HEYDUDE inflection — feels late, but flip-flop data is real. CAR upgraded at Barclays on Verra insourcing tailwind. Stifel May survey turned negative on home improvement, LOW carries the DIY tail. FIVE PT trimmed at Guggenheim on comp normalization.
MACRO & MARKETS
Goldman Prime: HFs net bought US equities for a third straight week and at the fastest pace in over 6 months, driven by long buys outpacing short sales across both Single Stocks and Macro Products. 8/11 sectors were net bought, led by Industrials, Info Tech, and Consumers (Discretionary + Staples), while Communication Services, Energy and Utilities were the only net sold
MARKET: WOLFE SEES TECH-LED RALLY CONTINUING; CONSUMER DISCRETIONARY COULD BENEFIT FROM IRAN DEAL AND LOWER OIL
Wolfe Research does not view last week’s S&P 500 pullback as a trend reversal, noting markets have become more sensitive to inflation and jobs data with oil elevated and a new Fed Chair installed. Twenty-four of the top 25 S&P 500 performers YTD are AI-related, and Wolfe maintains a positive outlook with tech and semis as preferred. On consumer, the firm explicitly flags that consumer discretionary stocks could benefit if an agreement is reached with Iran and oil prices decline, though any rotation would likely be temporary. Key catalysts this week: CPI Tuesday, PPI Wednesday. Limited potential for broader market leadership beyond a few areas.
MARKET: BOFA WARNS ANOTHER ~2% NASDAQ DOWNSIDE COULD TRIGGER BROADER CTA UNWINDS; RECORD $12B ETF SELLING FRIDAY
BofA’s Chintan Kotecha frames Friday’s 4.8% Nasdaq-100 selloff as the largest vol-adjusted drawdown since October 2025 — the 13th worst sigma decline since 1985 — likely marking the start of a coordinated unwind in systematic equity positioning. Estimated CTA stop-loss triggers for the NDX sat 4.3% to 6.8% lower heading in, with the most risk-averse models likely deleveraging Friday. BofA believes at least half of the CTA long base remains intact, with another ~90bps to 2% NDX downside potentially triggering broader unwinds. S&P 500 stop-loss levels sit 40bps to 2.6% lower; Russell 2000 triggers 2% to 5% lower — relevant for small/mid-cap consumer positioning. Leveraged and inverse ETFs sold a record $12B of NDX exposure Friday. SPX gamma (~$6.4B/day average through May/June) had dampened realized vol by ~1.3 points; that suppression now exposed. “Stretched upside momentum in AI leaders reached an exhaustion point and erupted into a fragility event,” Kotecha wrote.
MARKET: CITI LIFTS S&P 500 YEAR-END TARGET TO 8,100 FROM 7,700 ON EARNINGS, AI SUPERCYCLE
Citigroup raised its 2026 year-end S&P 500 target to 8,100 (from 7,700), implying ~10% upside, joining a wave of bullish strategist calls. The firm lifted 2026 EPS to $350 (from $320 set in December 2025) and introduced a preliminary $400 target for 2027. Citi cited resilience in corporate earnings and AI-driven growth, with “high confidence in continued earnings beats through year-end.” Cautionary note: AI is framed as a “one-time capex supercycle” rather than a traditional cycle, increasing the burden on earnings delivery to drive index returns beyond 2027. Index-level supportive for risk assets including consumer growth names.
BOFA WEALTH EFFECT CHARTS
BAC card data suggest US Luxury demand continues to accelerate
CONSUMER EPS VOLATILITY
Always great observations and color from BofA consumer specs.
MACRO: MAY PLACER TRAFFIC LED BY COST AND FIVE, HOME IMPROVEMENT AND AUTO PARTS NEGATIVE ACROSS THE BOARD
The firm reports May’26 average visits per venue Y/Y were positive across Broadlines, with COST leading at +7%, followed by TGT +4%, BJ +3%, and WMT +1%. The analyst notes Dollar Stores/Discounters led coverage with all positive ex. OLLI -4% (FIVE +16%, DLTR +4%, DG +1%), while Specialty was mixed at BBY +4%, DKS +1%, ULTA +1%, and WOOF -2%. Home Improvement traffic was negative across the board (FND -4%, LOW -2%, TSCO -2%, HD -1%), as were Auto Parts retailers (AAP -5%, AZO -5%, ORLY -2%).
MACRO: IATA CUTS ‘26 GLOBAL RPK OUTLOOK TO +2.1% Y/Y (FROM +4.9%), PASSENGERS TO +1.9% Y/Y (FROM +4.4%)
IATA’s updated 2026 outlook (released 7 June) now expects global RPKs to grow +2.1% Y/Y (vs. +4.9% prior) and origin-destination passenger numbers +1.9% Y/Y (vs. +4.4% prior), with the firm noting the cut spans all regions ex. Africa. The Middle East is now expected to contract -11.4% Y/Y (vs. YTD c.-24% RPK decline), with North America at +0.8% and Europe at +2.8%, implying a deceleration across most regions through the balance of the year. The new +1.9% O-D figure trails the c.+3% FY26 air traffic assumption embedded in Amadeus’ latest guidance but tracks closer to the firm’s own LFL passengers boarded growth estimate of +2.5% and air bookings growth of +0.3%.
Interesting to see how airlines trade today on this headline.
CONSUMER STREET RESEARCH
Upgrades
Avis Budget (CAR) Raised to Equal-Weight at Barclays; PT $160
Crocs (CROX) Raised to Outperform at Baird; PT $150
Downgrades
No downgrades in consumer sector today
Initiations
Black Rock Coffee Bar (BRCB) Rated New Neutral at Piper Sandler; PT $9
EARNINGS REPORTS
CPB +2%: ROUGHLY IN LINE WITH SIGNIFICANTLY LOWERED EXPECTATIONS, ORGANIC SALES BELOW CONSENSUS AND EPS SLIGHTLY ABOVE
Expect the pre-market gap to be faded.
EPS was fine but SG&A provided the lift, as organic was a small miss and they noted continue challenges. 3Q EPS of $0.50 vs Consensus $0.48 (SG&A drove the modest upside), with revenues about 40 bps light.
Earnings quality was low. Org sales decline of -4% missed consensus of -3.5% and gross margin declined 240 bps (in-line). Vol/mix declined -5%. No change to FY26 outlook, but management quantified 2-3% incremental inflation for FY27 if oil at $100/barrel.
Morgan Stanley provides a negative first look on the results:
That said, the quality looks low as an unexpected (to us) tariff refund benefit is offsetting higher Middle East-related costs in 4Q. Barring any incremental details on the call, we’d view this as likely one-time in nature, suggesting a weaker underlying margin exit rate. Moreover, cost inflation is likely to accelerate beyond 4Q with the company citing 2-3% incremental inflation above its typical base inflation rate in FY27 should oil remain around ~$100/barrel.
Net, while this is probably good enough for today given low expectations, the key debate remains the trajectory of OSG, particularly in Snacks, which was better than expected in the quarter (~100 bps) but still challenged (-4% y/y).
ANALYST RESEARCH & NEWS
CROX: BAIRD UPGRADES TO OUTPERFORM, PT $150 FROM $115 ON SUSTAINABLE NORTH AMERICA AND HEYDUDE INFLECTION
Baird upgraded Crocs to Outperform from Neutral with PT lifted to $150 from $115. The call is built around increased confidence that positive inflections at Crocs North America and HEYDUDE are sustainable, giving better visibility to a return to healthy total revenue growth in 2H26 (~+low-single-digit). Komp pairs the top-line view with tight cost controls and healthy cash return prospects to support upward bias on EPS. The upside case, framed on 2027E EPS, gets to $170-200+/share. Shares closed at $119.35; the new PT implies ~26% upside.
At the same time BTIG highlighted flip-flops as a positive trend in CROX. BTIG highlights:
Data Shows Momentum in Flip-Flops, Other Fashion Styles. According to the report, flip-flop arrivals are up 86% YoY for spring/summer, while jelly arrivals have more than doubled with 20% of styles already seeing majority sell-out. Additionally, peep-toe intake over SS26 has grown 29% YoY. OUR TAKE: Per our conversations with management from CROX and Steve Madden (SHOO, Buy, $50 PT) last week during FFANY (see notes here and here), both cos. highlighted strength in flip-flops, with SHOO stating that elevated flip-flops are trending well (see Exhibit 3), while CROX noted the style has been "having a moment" recently
CAR: BARCLAYS UPGRADES TO EW FROM UW, PT TO $160 FROM $140, VERRA INSOURCING WORTH $50-75MN ‘27 EBITDA
The firm upgrades to Equal Weight from Underweight and raises PT to $160 (from $140) on better-than-expected pricing/DPU trends and a $50-75mn ‘27 EBITDA tailwind from CAR’s decision to bring Verra Mobility’s toll/citation management in-house (termination effective September; CAR represented >10% of Verra revenue at ~$100mn+, and Verra’s Commercial Services segment ran ~60% implied EBIT margin in ‘25). The analyst raises 2Q Americas RPD growth to +2.9% Y/Y (from +2.0%) on healthy industry fleet levels plus World Cup pricing tailwinds, and now models 2Q DPU of $332 (vs. $340 prior, inline with guide) as Manheim rental risk pricing held up Y/Y in April (+3.2%) and May (+1.7%). The firm expects CAR to solidly beat 2Q EBITDA at $280mn vs. cons. $264mn and models FY26 EBITDA of $1,003mn vs. cons. $894mn, with a guidance raise to a narrowed $900-1,000mn range (from $850-1,000mn) viewed as plausible.
HTZ: BARCLAYS REITERATES UW AT $3 PT, BELOW GUIDE ON OPEX, LIQUIDITY OVERHANG PERSISTS
The firm reiterates Underweight and $3 PT, modeling 2Q EBITDA of $77mn vs. cons. $93mn and FY26 EBITDA of $158mn / 1.7% margin vs. cons. $296mn / 3.3% (still below the guided 3-6% margin range) on continued questions around DOE/SG&A trajectory. The analyst notes HTZ guided 2Q Americas RPD growth above the 1Q +6% pace on MSD% April gains and US airports RPD +~8% in 1Q, though 2Q fleet is guided down 1-2pts Y/Y and rental days down 2-3pts Y/Y. Liquidity remains the focus item: $837mn at 1Q (incl. revolver), $200mn April ABS top-up, with management guiding just under $1bn at 2Q-end and >$1.5bn by year-end, plans to replace lost $335mn of revolver capacity via capital markets, and the $250mn ATM equity program kept as an opportunistic tool.
FIVE: GUGGENHEIM CUTS PT TO $250 FROM $260, BUY MAINTAINED; STEEP COMP NORMALIZATION AHEAD POST-1Q
Guggenheim trimmed Five Below to $250 from $260, Buy reiterated. Heinbockel frames the post-1Q sell-off as a reaction to forthcoming steep normalization in comp momentum — “unusually healthy trend results” partially drove an 800bp comp acceleration to 23% and a doubling in EBIT margin. He likens the setup to the COVID recovery in early 2022, which gave way to top- and bottom-line declines and meaningful share pullback. The secular story remains intact, but until a floor on comp normalization is established, incremental buyers are dissuaded. At 11x 2026E EBITDA the stock is compelling for a mid-teens growth algo, hence Buy maintained.
WMT: MORGAN STANLEY NOTE ON 3P MARKETPLACE AND VIZIO ANCHOR RETAIL MEDIA THESIS, OW $140 PT REITERATED
The firm hosted an executive luncheon with Chief Growth Officer Seth Dallaire in Bentonville and walked away constructive on four pillars. The analyst notes 3P marketplace and general merchandise mix expansion structurally lifts Walmart Connect’s ad-revenue-to-GMV ratio above grocery-heavy levels, while Vizio extends the addressable ad market into streaming, automotive, and telecom, categories largely unreachable on the core eCommerce platform. The firm adds that Dallaire’s expanded global remit signals plans to deploy the US flywheel (ads + membership + marketplace) into international markets (Mexico and Canada first, per the firm’s read) with two-way innovation flow, citing Chile’s Carrito Listo as an inbound example. In-house agent ‘Sparky’ is also pivoting from single-item search to mission-based “whole-basket” queries, with cross-category journey-based recommendations the next roadmap milestone.
HD/LOW: STIFEL MAY SURVEY TURNS NEGATIVE SEQUENTIALLY, LOW CARRIES GREATER DIY IMPLICATIONS; HLMN/SMG MORE CONSTRUCTIVE
The firm’s May Home Improvement channel check turned negative sequentially, with weighted average revenue growth of +0.7% (down 140bps m/m, matching the Memorial Day 2026 print) and positive respondents falling to 46.1% from 49.3%. The analyst notes broad-based weakness across hardware +0.9% (-90bps), lawn & garden +0.9% (-90bps), and grills +0.6% (-90bps); net 13% cited unfavorable May weather across three of four regions, though the firm frames the underlying read as stagnant even adjusting for weather. NTM expectations were stable at +4% for the second consecutive month post the March drop, with a meaningful stepdown flagged in the South, while Ace Hardware respondents (n=18) at +3.3% continued to outperform (constructive for HLMN and SMG against a softer tape, though SMG’s June update points to weaker May branded POS at +1% YTD vs. roughly +4% through April). The clearest negative read-through is to LOW given heavier DIY mix, with HD/LOW both flagged explicitly.
BURL/TJX: UBS EVIDENCE LAB SURVEY (N=1,000) CONFIRMS STRUCTURAL SHARE SHIFT FROM DEPT STORES INTACT, BUY REIT
The firm’s Evidence Lab survey (n=1,000) confirms the structural off-price share shift remains intact, with purchase intentions running net +MSD% to +LDD% for Off-Price vs. flat for Department Stores and the directional gap widening; TJX and BURL remain Buys against Sells on Macy’s/Kohl’s/Dillards. The analyst notes price sensitivity has risen materially, with 59% of consumers willing to switch retailers for a ~5% price gap (up from ~50% in 2025), 65% citing low prices as a reason to start shopping off-price, and “high prices” remaining the top reason consumers exit department stores. The firm flags quality/value convergence as a key incremental finding (shoppers no longer trading down on quality, off-price now delivering both), underappreciated assortment breadth (65-80% of off-price shoppers cite variety/selection as a draw vs. department stores perceived as repetitive), and a defensible “treasure hunt” moat, with ~50% citing wanting to see/feel product as a reason not to shop online and worsening delivery experiences emerging as an additional e-commerce substitution barrier.
VSXY: JPM POST-EPS CFO MEETING CONSTRUCTIVE ACROSS REV/MARGIN/KPIS, FY27 EPS $5.87 VS. STREET $5.35
The firm walked out of a post-EPS CFO meeting straightforwardly constructive across revenue, margin, and customer KPIs, modeling FY27 EPS of $5.87 vs. Street $5.35, with the nit that implied June/July SSS bakes in a sharp decel to +2.5-4% to land FY26 in line with Street despite the big raise. The analyst notes 1Q SSS of +13% (vs. +8% in 2H25) was driven by Bras inflecting to LDD growth, Panties +mid-teens, and Sleep breaking out beyond its historical gifting-season pattern, with store traffic outpacing the mall by ~800bps vs. ~500bps prior, while 24+ month lapsed new customer acquisition accelerated to LDD in 1Q skewing younger with higher AURs and greater full-price mix (flagged as the durability driver the Street is underappreciating). 2Q QTD (May) tracks at ~+13% SSS / ~16.5% revenue growth per the firm’s math vs. the +9-11% guide, with the firm viewing the embedded decel as conservative and modeling +10% SSS for the full quarter. FY26 GM modeled +190bps Y/Y to 39.0% (= Street) and FY27 GM at 40.1% vs. Street 39.5% on B&O leverage and full-price mix (~70-100bps each), with tariffs flipping to a $25M net benefit vs. prior $40M headwind plan; FY27 op margins modeled at 9.5% vs. Street 8.8% approach mgmt’s LDD target (brand ran low-to-mid-teens at prior peak), and 2.2M shares repurchased for $100M in 1Q (vs. zero in all of FY25) plus $350M+ annual FCF over the next two years supports continued buybacks.
SJM: UBS BUY-RATED AS ONE OF FEW PACKAGED FOOD NAMES WITH PATH TO ORGANIC GROWTH
In a broader packaged food preview where UBS argues growth algorithms across the group could be “permanently impaired” and valuations may face further multiple compression, JM Smucker stands out as one of the few names with a credible path to organic sales growth and strong bottom-line delivery over the next 12-18 months. UBS reiterates Buy, noting valuation still screens attractive on both absolute and relative bases. The cautious framing: best-case guide will likely only be in line with expectations, capping near-term upside.
GIS: UBS SELL, PT CUT TO $30 FROM $35 ON FY27 GUIDE LIKELY BELOW EXPECTATIONS
UBS lowered the General Mills PT to $30 from $35, Sell reiterated, ahead of an expected FY27 guide that disappoints. The bear case: underwhelming top-line growth, cost pressures offsetting HMM productivity savings, and lapping unique items including the 53rd week, incentive comp, and a divestiture. The PT cut reflects negative estimate revisions and peer multiple compression. UBS’s broader packaged food framework argues structural shifts in health and wellness could materially alter category growth trajectories, supporting further de-rating risk across the group.
BARCLAYS: TSCO, DG, DLTR, ORLY MOST EXPOSED TO RISING GAS PRICES ON LOWER-INCOME/RURAL CUSTOMER MIX
Barclays released a consumer gas price model assessing relative exposure across its retail coverage, incorporating regional mix, urbanicity, income mix, and vehicle ownership. On average, the framework points to a $942 annualized increase in gas spending for retailer customers, equating to ~1% of annual pre-tax income. TSCO screens as most exposed given its rural customer base where miles driven and truck ownership skew higher — customers face an ~$1,018 annual increase, the highest as a percentage of income. Dollar stores and auto-parts retailers also face outsized impacts on lower-income customer bases: DG more exposed than DLTR, with ORLY also flagged (text truncated). Barclays observed ~10% regional spread in YoY gas price changes. Note frames the analysis as awaiting potential Iran resolution that could reverse recent valuation pressure across the retail group — relevant to today’s Iran headline on cessation of military operations.
Index Changes
S&P announced quarterly changes to indices: CPB, POOL will be removed from S&P500 and added to the S&P smallcap 600. COTY will be removed from S&P midcap 400 and added to the S&P smallcap 600. WRBY will be added to the small-cap 600 while VITL will be removed.
Beer industry is expected to receive a major boost in demand from this year’s expanded World Cup (fans could drink an extra 1B pints of beer during the course of the tournament
BBY (+1.4% in the pre)
*Partnering with Meta to open “Meta Lab @ Best Buy” experiential spaces in 50 stores this summer for hands-on AI glasses and VR demos
EARNINGS CALENDAR
