The early round of earnings reports in the retail sector showed some pockets of consumer strength even with forecasts for holiday spending being reeled in. The biggest pullout so far may be that travel spending is still very strong with American Airline (AAL), Delta Air Lines (DAL), United Airlines (UAL), and Alaska Air Group (ALK) all pointing to strong booking trends into Q4 even with fares elevated.
While there are enough dizzying macro headwinds to be concerned about overall trends for retail giants like Target (TGT), Walmart (WMT), and Costco (COST) - Jefferies took on the question of where else outside of travel that consumer discretionary spending is looking surprisingly strong.
The firm's data picked up strong interest in offerings for McDonald's (NYSE:MCD), driven by the introduction of a limited-edition adult happy meal released through a partnership with the Cactus Plant Flea Market fashion brand. Yum Brands' (YUM) chains also saw an increase in website and social media interest that bodes well. Across the restaurant industry, analyst Andy Barish continues to expect demand to remain strong based off strong household balance sheets and analysis of same-store sales data across the fast food, fast casual and casual dining categories.
In the casino sector, the Jefferies scan of Internet data indicated strong momentum for Red Rock Resorts (RRR) in particular. Analyst Cassandra Lee's bullish thesis on RRR is based on the company's positioning in the local Las Vegas market, which is seeing population growth ahead of the U.S. average.
A standout in the leisure sector is Brunswick (BC) based on tracking from Jefferies on social media trends. Analyst Anna Glaessgen thinks Brunswick (BC) has continued to benefit from a younger, digitally active customer base becoming more involved in boating. BC is expected to continue to grab leisure wallet share as it brings in new customers.
Jefferies also dug out an interesting trend with consumer staples. The new Downy Rinse and Refresh capture product launch has appeared to capture consumer interest with strong search and web traffic rolling in for Procter & Gamble (PG). Analyst Kevin Grundy also pointed to high web traffic for Colgate-Palmolive (CL), which has continued to show momentum in its personal care portfolio.
As for food trends, Jefferies pointed to elevated web traffic for McCormick & Company (MKC) and Conagra (CAG), with the latter's boost seen being tied to the release of new varieties of sunflower seeds and pudding cups in partnership with popular brands Frank’s RedHot, Starburst, Fruity Pebbles and Cinnabon.
Other companies that have seen a notable increase in web traffic and social media interest includes Lindblad Expeditions (LIND), PriceSmart (PSMT), Denny's (DENN), and e.l.f. Beauty (ELF), Carter's (CRI), which may be benefiting from trade-down spending patterns with consumers.
See a list of the top consumer discretionary stocks by Seeking Alpha Quant Rating.
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