Yahoo Finance Mixed signals from retail week: Morning Brief
This is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
The chart of the day
What we're watching
What we're reading
Economic data releases and earnings
This has felt like a weird week for investors, in part because the US economy is looking really weird.
On the one hand, we got to digest better-than-expected retail sales for July. My first thought when I saw the results was that maybe the consumer has some spending power left despite two years of rampant inflation.
"The economy is so hard to predict," Cisco chairman and CEO Chuck Robbins told me midweek at our NYC headquarters. I agree with Chuck!
Then there was the mother of all weirdness: This week's reads on US consumers apart from the barrage of upbeat government data, which I never have been a fan of.
Home Depot's CEO Ted Decker opted against making a bottom call for the economy and housing market earlier in the week.
Cheap chic merchandise purveyor Target issued a big-time earnings warning for the full year.
When I caught up with Target CEO Brian Cornell and CFO Michael Fiddelke, they voiced greater concern about the economy than the last time we chatted about earnings three months ago.
Fiddelke specifically called out looming student loan repayments as a key factor in some very cautious third quarter guidance — even if some analysts are downplaying it.
Cornell said the back-to-school shopping season had a "solid" start, but to me that rings hollow given the 5.4% comparable sales drop and guidance cut.
A day after Target reported, Walmart blew the minds of an already bullish Wall Street. Big sales gains in stores and online. Grocery sales crushed it. Full-year guidance lifted. What a different vibe than Target's earnings!
"Historically, our value proposition has been known for everyday low prices and for providing that value for customers. And what we see right now is that convenience resonates just as much to our customer base. And if you're a household that makes over $100,000 a year, you value convenience just as much as the next person," Walmart CFO John David Rainey told me.
The read from those I talked with: This was another quarter where higher-income households traded down from Target and went to Walmart.
But what's unclear is why are they trading down at all given the strength we're seeing in other categories, like fast-casual restaurants?
IPO juggernaut Cava came out with an incredible earnings report this week showing same-store sales up 18.2%. People may be trading down, but they're still spending.
My Cava bowl last weekend on Long Island cost $16. Sure, I got a ton of food. But I used to be able to feed myself for days for $16! So while people are cutting trips to Target and Home Depot, they apparently have a few bucks for a $16 Cava bowl with crazy feta in an urban market.
In my view, the economy is weird right now, and stock prices aren’t priced for weird. Keep that in mind as the calendar turns to fall.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on the banking crisis? Email brian.sozzi@yahoofinance.com
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
