Citi's retailing analyst Deborah Weinswig just published a new research note titled Empty Pockets Update.
"Empty Pockets envisions a slowdown in consumer spending for the remainder of the year," explains Weinswig. "We see a shift towards more discerning and frugal purchasing behavior by consumers, with the biggest delta in spending patterns coming from high-income consumers (due to the negative wealth effect) and a smaller delta from low-income consumers (who remain strapped)."
Having said that, she lists 10 reasons why she is cautious on the consumer:
1) Leading macro indicators point down; 2) unemployment ticks up; 3) consumer confidence moves lower; 4) falling markets create negative wealth effect; 5) home prices remain pressured; 6) consumer balance sheet is shaky; 7) economic weakness abroad; 8) uncertainty surrounds the U.S. presidential election; 9) Broadlines SSS have slowed; and 10) growing retail inventories point to cautious spending.
In this environment, Weinswig recommends own shares of Dollar General (DG), Kroger (KR), and Walmart (WMT).
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