Zachary Warring on Retail Data, Tariffs, and Top Consumer Stock Picks

Limitations of Current Retail Data

• ⚠️ The current retail sales report is backward-looking and doesn't accurately reflect today's consumer spending habits.
• 💡 More up-to-date data, such as Adobe's Black Friday and Cyber Monday sales updates, provides a better, more current read.

Consumer Spending and Tariffs

• 📈 Most companies have successfully offset tariff impacts, leading to better-than-expected results, especially heading into the holiday season.
• 📊 Despite some bifurcated data for lower-middle-income consumers, overall consumer spending is expected to be okay.

Apparel Industry Valuations and Performance

• 📉 The apparel and footwear industry has seen significantly low valuations, with many companies trading at half their value from the previous year.
• 🎯 Lululemon, while a high-end brand, caters to some middle-income consumers and has been impacted by tariffs and weaker consumer demand, leading to a valuation drop to 12-13 times forward earnings from 25.
• 🚀 Companies like Deckers have also seen similar valuation declines despite continued growth.

On Running: Pricing Power and Brand Strength

• 👟 On Running has experienced a significant stock pop due to its ability to manage tariffs and increase gross margins by 500 basis points.
• 💰 The company has successfully passed on costs to consumers, indicating a healthy and hot brand with attractive valuations relative to previous years.

Bellwether Stock Picks and Valuations

• 📊 Off-price retailers like TJX are considered overvalued despite strong performance and consistent growth, trading at over 30 times forward earnings.
• 🧸 Hasbro is highlighted as a potential bellwether due to its expansion into digital gaming, which offers higher margins and contributes to revenue growth, helping to offset tariff impacts.