2 Charts That Sum Up the Current State of Consumer
Comp sales data favor Costco, while TJX shares enter oversold territory.
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While Walmart’s (WMT) earnings call wraps up, we’ll have more in-depth comments to share, but one that stood out to us was about the consumer and gas prices.
According to Walmart, it is seeing some incremental pressure on the consumer relative to the beginning of the year with higher fuel prices, calling out gas above $4 per gallon. Data from AAA put gas prices back at $4.00 a month ago and we’ve seen that level creep higher to the current $4.10 per gallon. Diesel prices are hovering around $5.55 per gallon, up from $5.10 a month ago, and $3.70 a year ago.
This suggests we are going to see, if we haven’t already, the return of fuel surcharges and renewed attempts to pass on higher transportation costs. As we’ve noted the last several days, Friday’s Flash August PMI report from S&P Global should be a very revealing read.
Charts That Say It All
As we think about inflation pressures and the consumer, two charts sum things up pretty well, in our view: the headline consumer price index and average hourly earnings. As you can see by comparing the two charts below, year-over-year CPI figures are higher than those for the growth in average hourly earnings.
And to make things a bit easier on the eyes, here is a chart comparing those two data sets:
The takeaway for us is that consumers will continue look for ways to maximize disposable spending dollars. Against that backdrop, we continue to favor Costco (COST), Amazon (AMZN), and TJX (TJX).
TJX and Costco
On the back of Thursday’s market reaction to Walmart’s results and guidance, TJX shares have crossed over into an oversold condition.
For those that did not pick up more TJX shares like we did at the Portfolio yesterday, this offers an even more favorable risk-to-reward tradeoff.
As far as Costco goes, comparing its adjusted U.S. comp sales for May, June, and July between 6.9%-8.7% to the 2.6% posted by Walmart for its July quarter… the data speaks for itself.
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At the time of publication, TheStreet Pro was long AMZN, COST, and TJX.
