October Retail Sales May Be the Most Important Report of the Week
The timing of the report also gives us a yardstick by which to measure the array of retailers reporting this week.
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* The October Retail Sales report should benefit from Amazon's October Prime Shopping Event
* October Black Friday sales may limit upside to retailer guidance
* Here's why we remain cautious with apparel and related retail companies
In our opening comments, we shared why we and the market will be focused on tomorrow's core CPI data for October, but we have another important report this week, both for the market and the portfolio - the October Retail Sales report.
It should be another positive for Action Alerts PLUS names of Costco COST and Amazon AMZN as well as a few others in the portfolio.
Parsing the report's line items tell us if consumers have shifted their spending as they took advantage of Amazon's October Prime shopping event and competing events. That should lead to a strong showing for the nonstore retail sales category, much like we saw in July with Amazon's 2023 Prime Day.
The category should also benefit from an earlier than usual start to the holiday shopping season as some retailers opted to start Black Friday deals in late October. We read this as retailers aiming to win shopping dollars early in the spending season as well as an attempt to shore up their own October quarter. However, the ensuing pull forward of holiday sales could limit potential upside in their guidance relative to consensus expectations.
The timing of the October retail sales report also gives us a yardstick by which to measure the array of retailers reporting this week. Retail sales data over the last few months showed consumers were rather selective, favoring dining out and travel experiences versus spending at department stores and on apparel.
We only have indirect exposure to the apparel market, which in our view is a rather discretionary category, especially in the current environment. With return to office normalizing and pent-up spending on clothing having happened during the post pandemic reopening, apparel companies and those retailers that rely on it could have a tough time coming out of the holiday shopping season.
We could see a promotional environment take its toll on margins and bloated inventories do the same coming out of the holiday season. That thinking will have us paying close attention to comments from Gap GPS , Foot Locker FL , and Macy's M later this week.
Action Alerts PLUS is long COST, AMZN.