The Weekend Edition is pulled from the daily Stansberry Digest.
The last wisps of earnings season are upon us...
Several popular U.S. retail businesses have been giving updates. We've been watching those announcements to get some insight into the state of the American consumer.
Big-box giant Target (TGT) and discount-department-store operator TJX Companies (TJX) reported earnings on Wednesday. Both painted a picture of customers pulling back on discretionary purchases and looking for value.
Our Stansberry NewsWire editor Kevin Sanford wrote to readers the same day, saying that Target reported strong second-quarter numbers. One reason is that the excess inventory that it built up last year had begun to fall back to "normal levels."
In mixed news for the company, Kevin wrote...
Adjusted earnings came in at $1.80 per share, more than four times higher than in the same period last year. However, Target's sales declined for the first time in four years. On top of that, the retailer cut its profit outlook for the year. It anticipates consumers will continue pulling back on larger discretionary purchases such as home goods, toys, electronics, and apparel.
Meanwhile, TJX – which runs chains that include T.J. Maxx, Marshalls, and HomeGoods – said year-over-year sales grew 8% and profits jumped 23%. Reselling other retailers' surplus inventory is central to TJX's stores, and the company said it benefited as higher-end retailers unloaded their unsold merchandise.
TJX also raised its outlook for the rest of the year, projecting comparable-store sales to grow between 3% and 4%.
So, all in all, the story from these two major retail companies is that pandemic inventories are burning off... and more folks would rather hit the bargain bin than jump on big-ticket purchases.
Another retail CEO added some color to the conversation...
In its earnings report, home-improvement retailer Home Depot (HD) reiterated its outlook for its full-year sales to drop between 2% and 5%. It also continues to project that earnings will drop between 7% and 13% from last year.
Like with Target, Home Depot said sales of big-ticket items are off significantly... with customers spending 5.5% less on products priced above $1,000. But Home Depot's CEO Ted Decker said customers continue to buy less-expensive items.
Overall, Decker said he's cautious about things the rest of the year...
We don't know... where spending in home improvement, in particular, will ultimately settle. And we don't know how the monetary-policy actions, which are specifically intended to dampen consumer demand, what that impact will ultimately have on consumer sentiment in the overall economy.
Decker also said in a conference call with Wall Street analysts that while a shift in consumer spending from more expensive to lower-priced items is happening...
The overall economy and the consumer in particular have remained incredibly resilient. As we all know, the economy continues to grow with a number – another great GDP print for the second quarter.
Speaking of that, the latest GDPNow estimate routinely published by the Atlanta Federal Reserve projects third-quarter gross domestic product rising at an astonishing 5.8% annualized growth rate. This follows new reports today showing increases in housing starts and U.S. industrial production.
Wow.
So far, the buzzword about consumers in 2023 continues to be "resilient"...
That's a nice way of putting it.
To me, in plain English, if you and I or anyone else is "resilient," it's only because we feel like we need to keep spending money on things like food, energy, and health care. But I haven't met anyone who wants to be spending more money on these things (or anything).
Yet thanks to the pliability of government-issued fiat currency and the hubris of central bankers, the value of the dollar has kept going down – and prices of all kinds of things have kept going up... And wages haven't been keeping pace.
It's a similar story with residential real estate. Average home prices haven't dipped significantly (price movement will vary by regions and cities) even as houses have become their most unaffordable in years. The average 30-year mortgage rate is now above 7% and at a 30-year high, while it was below 3% just two years ago.
As we've said many times before, home prices are holding up because there's not enough supply to meet demand. This is a long-term structural trend.
So is the fact that people still want to live in houses even if the monthly interest cost on a $400,000 home today is about $1,000 more than it was two years ago, according to Freddie Mac.
Resilience doesn't feel like the right word to describe this situation...
Reluctant acceptance, or resignation, is more like it.
After all, we're talking about the same group of American consumers that continues to pile up a record amount of credit-card debt, now exceeding $1 trillion for the first time ever.
U.S. credit-card balances rose by $45 billion in the second quarter of 2023 alone, according to the New York Federal Reserve's latest quarterly household debt and credit report.
That's not resilience... unless you take pride in racking up debt. It's just doing what's necessary when the cost of living is so high and, knowingly or not, dealing with the effects of trillions of dollars of pandemic-related stimulus.
In any case, the latest data from the U.S. Commerce Department shows Americans are still spending more money on retail goods. Sales rose 0.7% in July. And nine of the 13 retail categories were up, including sporting goods, clothing, and restaurants and bars.
As Kevin wrote in the NewsWire this week...
The data reveals that American households, supported by a strong labor market and rising wages, are finding ways to weather current economic conditions. However, while consumers are starting to regain their purchasing power, the resumption of student loan payments and Americans' little savings still paint a cloudy picture.
Overall, we can take away one story from the picture in retail so far...
Customers are increasingly spending on what they need more than big-ticket items that they might want to buy instead.
This shift is significant, considering about 70% of the U.S. economy is tied to consumer spending. Stay tuned.
In this uncertain environment, Joel Litman is back with an important message...
Moving on and closing things out today, we have an important update and opportunity to share via our colleague Joel Litman, founder of our corporate affiliate Altimetry.
For those who might not know Joel, he's a world-renowned finance professor and accountant who has made several popular appearances at our annual Stansberry Research conferences. (He'll be there again at this year's event in Las Vegas. For more information on the event, click here.)
Over the years, Joel has developed a form of "forensic analysis" that neither Wall Street firms nor the U.S. government have been able to duplicate. Often, firms or agencies call on Joel to expose what they can't see...
The FBI once hired him to develop a way to see which CEOs mean what they say during their earnings calls... and which ones are lying. And we were pleased to become associated with Joel a few years ago when he decided to bring his expertise to the public, too.
It seems like not that long ago...
... but it was early last winter when Joel shared what proved to be a prescient message that we passed along in the Digest. As we shared on December 1, 2022, shortly after Joel went public with this prediction...
Joel is sharing the names of three sectors that his systems say will likely crash in 2023... and three other sectors that are best positioned to soar.
It's that kind of time. The days of the bull market genius who could pick any stock and watch it grow are long gone.
And within those three sectors, Joel has picked the very best stocks he believes folks should own right now as part of a brand-new model portfolio.
In a free presentation back then, Joel shared two free picks, one that he was bullish on and another he said to avoid completely. The stock he recommended buying is already up roughly 70% this year – and the one he said not to touch is down almost 50%.
Today, Joel thinks his prediction of gains being isolated to specific sectors is only more relevant...
Specifically, he is alerting folks about a market event that has only happened twice in the past 15 years – and is now underway.
This event, Joel says, will trigger a massive opportunity in a select group of stocks before the end of the year. I can tell you that this opportunity is not in artificial intelligence, commodities, or anything else you may have heard of in the news.
This is the way Joel operates. A lot of what he talks about, you will not hear anywhere else...
Tune in to Joel's latest talk for all the details right here.
Good investing,
Corey McLaughlin
Editor's note: If you check out Joel's latest presentation, you'll get his updated game plan for the rest of 2023... hear more about how he analyzes specific sectors for opportunities... and learn how he identifies parts of the market to avoid. And just for tuning in, he will share two more free picks, just like he did last year.
That alone may be worth watching. Click here to listen to his latest message now.
