NoBull 4Q23 All-Inclusive Report Announcements

Apr 1, 2024 | No Bull Economics, Reports

NoBull’s analysis & benchmarking of the leading 80+ retail companies are presented in the following 4Q23 reports: (1) Corporate Analysis Summaries; (2) Same Store Sales Benchmarking; (3) Financial Performance Benchmarking; (4) Retail Stock Performance; and (5) Economic Dashboard. Notably, quarterly financial results for the retail sector were generally healthy despite a difficult macro environment which has been particularly punishing on the lower income demo.

NoBull’s 4Q23 All-Inclusive Research Package

NoBull Company Coverage Chart

Leading retail management teams provided substantial insight into the consumer & economy during their 4Q earnings presentations, as outlined by the following highlights:

  • McDonald’s posted very strong 2023 results with U.S. comps up +8.7% for the full year. 4Q results moderated because of weakness from lower-income customers and management expects to maintain this level of growth in 2024.
  • Papa John’s reported that its February sales strengthened after softening in January and the pizza segment is well positioned, having taken less pricing relative to the other QSR segments.
  • Wendy’s reported that while the consumer is under pressure (resulting in a soft 4Q23 for the industry), prospects are looking up.
  • Denny’s reported that it does not have a lot of confidence in the general economy when looking into 2024 and this explains expectations for continued traffic pressure, especially from half of its customer base that earns less than $50k.
  • Texas Roadhouse reported that its restaurants are the busiest they’ve ever been, and that consumer behavior did not change during 4Q nor during the first 50 days of 2024.
  • ARKO Corp (sixth largest convenience store operator) is positioning 1Q24 for a high-single-digit decline in retail fuel gallons and a mid-single-digit comp decline for merchandise.
  • Growth in Prepared Foods was primarily driven by lower-income customers who are attracted to Casey’s General Stores value & quality equation.
  • Conagra Brands reported that U.S. consumer behavior shifts emerged last spring as the cumulative effect of inflation caused consumers to begin to stretch their budgets by pivoting away from single-serve frozen meals in pursuit of more cost-effective multi-serve meals & scratch cooking.
  • General Mills reported that consumers are currently stressed by the cumulative impact of inflation over the past few years.
  • Mondelez’s 4Q characterization of consumers: waiting to buy on promotions & not buying with the same frequency; downsizing & purchasing an increased volume of smaller formats; an increase in club & e-commerce channel mix; and less disposable income from SNAP reductions.
  • Kraft reported that business was more challenging than originally anticipated during 4Q as the impact of higher interest rates continued to weigh on the consumer at the same time lapping excess SNAP benefits hit peak level.
  • While inflation has been slowing, prices for the basics like food & lodging are still much higher and consumers are prioritizing & making trade-off spending decisions according to Best Buy.
  • CarMax reported that used car affordability remains a challenge for consumers & that delinquency levels for its finance arm remain elevated versus historic norms.
  • Dollar General reported that positive traffic for the last 2 quarters reveals that their customers are getting healthier.
  • Target reported a mixed consumer outlook, with many feeling stretched & making trade-offs to meet the needs of their families while also indulging in the occasional luxury.
  • Walmart’s management was encouraged by the strength of its unit & transaction growth during the quarter.

While the economy & sales started to turn down at the end of 2023, 4Q comps were generally respectable as price increases continued to outdistance traffic declines, with the big retail chains continuing to drive ticket & sales growth from higher-income demos that are off-setting traffic & sales softness from the lower-income demos. 

4Q23 Retail Same Store Sales by Segment Chart

The leading retail companies are starting to catch their breath now that y/y input cost inflation increases have sharply declined (actually deflating in some cases) while past & ongoing retail price increases have remained in place, boosting margins. Further, both consumers & management teams are learning to successfully adapt to a higher cost operating environment after struggling to find their way for the last couple of years.

NoBull Retail Financial Benchmarking 4Q23

After tanking in 2022, retail stocks have continued their recovery throughout 2023 and into 1Q24 as investors reward management teams for pivoting & repositioning their brands & business models sufficiently to drive much needed margin improvements in a challenging macro environment.  

NoBull Consumer Stock Performance Dashboard 1Q24

  • Consumer economic tailwinds: retail sales could be stronger but remain healthy at +3%; strong personal consumption expenditures growing at mid-single-digits with spending on services continuing to outdistance spending on goods; inflation continues to trend down with the PCE price inflator (Fed’s primary gauge) dropping to +2.7%; declining gas prices; strong employment; healthy disposable personal income growth at +6.4%; and a decent savings rate. 
  • Consumer economic headwinds: Mounting pressure from higher interest rates (including 21% credit card interest rates & 7% mortgage rates) has driven a 16% increase in personal bankruptcies over 2023. Similarly, credit card delinquencies are at their highest level since covid, although they remain at a manageable level for the time being.

Key Consumer Economic Metrics Graph

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