According to CNBC, two Wall Street analysts said a recent sell-off in well-known consumer stocks could give investors a chance to buy companies that can withstand pressure on household spending. Consumer staples and consumer discretionary stocks have both underperformed the S&P 500 over the past three months, with the State Street Consumer Staples Select Sector SPDR ETF (XLP) down 4%, the Consumer Discretionary ETF (XLY) down 5%, and the S&P 500 up 4.3%.
Home Depot and McDonald's have each fallen 18% in three months, TJX Companies is down 10%, Costco is little changed and Walmart is down 3%. Paul Hickey, co-founder of Bespoke Investment Group, said stubbornly high interest rates and gas prices have weighed on the group, while higher borrowing costs and energy bills have hurt consumer spending and rising Treasury yields have given investors an alternative to stocks. Joe Feldman, an analyst at Telsey Advisory Group, said investors are often looking at individual stocks rather than the entire sector and that high-quality companies with significant share-price declines can be worth revisiting.
Feldman said Home Depot has posted seven straight quarters of comparable-store growth and is expected to continue that trend in the second half of this year. He said McDonald's has been working to win back lower-income consumers and continues to post solid results despite softer spending. He said Costco's sales and earnings have been strong and that its cash pile has been building, while Walmart's business remains strong even after a same-store sales miss in its most recent quarter. Hickey said Walmart and Costco have shown they can withstand macroeconomic pressure through multiple business cycles, though the short term could be bumpier. Feldman also said TJX has already seen trends improve after a merchandising misstep last quarter, while Ross Stores has not missed a beat and may be taking market share from TJX.
Home Depot and McDonald's have each fallen 18% in three months, TJX Companies is down 10%, Costco is little changed and Walmart is down 3%. Paul Hickey, co-founder of Bespoke Investment Group, said stubbornly high interest rates and gas prices have weighed on the group, while higher borrowing costs and energy bills have hurt consumer spending and rising Treasury yields have given investors an alternative to stocks. Joe Feldman, an analyst at Telsey Advisory Group, said investors are often looking at individual stocks rather than the entire sector and that high-quality companies with significant share-price declines can be worth revisiting.
Feldman said Home Depot has posted seven straight quarters of comparable-store growth and is expected to continue that trend in the second half of this year. He said McDonald's has been working to win back lower-income consumers and continues to post solid results despite softer spending. He said Costco's sales and earnings have been strong and that its cash pile has been building, while Walmart's business remains strong even after a same-store sales miss in its most recent quarter. Hickey said Walmart and Costco have shown they can withstand macroeconomic pressure through multiple business cycles, though the short term could be bumpier. Feldman also said TJX has already seen trends improve after a merchandising misstep last quarter, while Ross Stores has not missed a beat and may be taking market share from TJX.