September core retail sales growth, per the Census Bureau’s monthly report , accelerated from the prior three-month trend, with strength coming from more affluent consumers, weight loss drugs, K-Pop Demon Hunter merchandise (and like categories), and the absence of Temu (a previously disruptive agent). September also faced a number of large 1-off headwinds; their lapsing sets up October for stronger growth on a MoM basis. However, October ’24 was a very strong month, making it a difficult compare, plus there was the shutdown jitters and SNAP break, and so we doubt that it will outgrow September’s +5%; +3% would still be solid.

The club channel continues to thrive in today’s thrifty K-shaped economy, with the channel and its strong private brands taking meaningful share-of-stomach. The club channel is widening its price gaps to conventional grocers by not increasing retail prices despite commodity cost inflation, implying that the share capture is likely to accelerate. That share capture will lead to further volume and margin pressure on national CPG brands. In yesterday’s note on Walmart’s results and its strategic actions, we highlighted how it was leaning into providing greater value to its shoppers by not passing through cost inflation onto its shoppers and increasing price rollbacks.

When prices are inflating and the consumer is evermore thrifty, it’s a great time to be an off-price retailer. That, plus easy comparisons allowed the sector to drive a +400bps sequential acceleration in comp-sales; however, as shown in the table, the 2-year CAGR was little changed. That said, the sequential improvement in the observed traffic trend suggests that the underlying pace of the business has improved due to the “evermore thrifty” component as well as the brands success in sourcing more better & best product brands, especially for **Ross Dress for Less **and Burlington stores, whereas TJX is already playing that card well.

With FQ3 results from Walmart, Targe t, Home Depot , and Lowe’s, it is clear that our K-shaped economy is becoming more pronounced , and its “pronouncement” is now undermining aggregate consumer expenditure and the retail industry (and CPG). In response, retailers and brands are focusing even more on affordability and being more tactical in any price increases in response to tariffs or cost inflation. (See our story –What’s happening in Vegas, isn’t staying in Vegas) That, in turn, is pressuring margin rates and profits.

As previewed (Housing-Related Retail – Are Things Improving? It depends upon your neighborhood, if pricey, then yes), the comp-sales results of Home Depot and Lowe’s improved slightly on a 2-year basis, but softened on a 1-year basis (lapping hurricanes). Comp-ticket and big-ticket are accelerating, driven by stronger growth in big-ticket items (appliances, power tools, etc.) and bigger Pro-oriented projects. Home Depot CEO Ted Decker said, “While underlying demand in the business remained relatively stable sequentially, **an expected increase in demand **in the [fiscal] third quarter did not materialize.

With Target’s FQ3 results, we wanted to circle back to our preview note , “Target – Updated views on Target’s performance, any good news?” In that note, we opined that there were a few key things to listen for in the results, while also highlighting the competitive challenges. Below we highlight those items, along with what we heard. Our conclusion from all of this is we see progress in both management qualitative comments and Advan’s data, especially in the month of October – a fairer month to judge progress given that incoming CEO Michal Fiddelke is just getting started with his strategic plan to right Target.

Next week kicks off retail earnings, including home improvement (our preview here ), Target (here ), off-price, and the behemoth – Walmart. Prior to the pandemic, generalists used to view Walmart as an important read on the consumer; however, Walmart generally was a misread, as it skewed rural and to the less-affluent. As followers and readers know , Walmart’s “contemporization” won them significant market share in the suburbs and near-burbs, and with the more-affluent.

The underperformance of HD and LOW since we wrote about their improving results on August 20th is curious. Despite the 30-year mortgage rate declining from 6.6% to 6.3%* and favorable Q3 results from building product manufacturers and furniture / home-related retail, HD / LOW have declined and significantly underperformed the S&P 500. Also pointing to improvement is the NAHB’s remodeling index “which for the third quarter, posting a reading of 60, up one point compared to the previous quarter.

As we saw in Starbucks’ results , Dutch Bros. (BROS) also reported an improvement in its transaction trend with comp-transactions increasing 6.8%, taking the 2-year +430bps higher, and the 3-year +220bps higher. Systemwide sales increased 21% to reach a $2.3B annualized run-rate. Systemwide unit growth of 14% took the count to 1081 locations. These are especially impressive growth given that direct competitor 7 Brew Drive Through Coffee is growing at an even faster rate (150%) on a high level of sales ($1.

MGM Grand has a broad portfolio of premium (Aria, The Cosmopolitan, MGM, and Bellagio) and mass properties (Luxor, Excalibur, New York, etc). Its Las Vegas Strip Resorts reporting segment showed a -8% decline in room-rate, a -5% decline in casino revenue, and a decline in food & beverage sales. Within the portfolio, stronger trends at its premium-end properties were offset by declines in the remainder, i.e. their rate of decline was worse.