"Something Is Not Quite Adding Up On The US Consumer": Why Goldman Says "This Morning Feels Little Different"

As discussed earlier, TGT just made a fresh 52 week lows today... actually after 10 straight days of declines, it is down to levels last seen just before the covid pandemic (and down more than 50% from its all time highs. But it's not just the doom and grooming retailer: over the past 24 hours, Capri holdings tumbled -11% after disappointing guidance, Victoria secret missed substantially overnight and also plunged. In short, as Goldman's Rich Privorosky writes, "something is not quite adding up on the consumer" and asks "have we just run out of excess savings and are we returning to replenishing savings?" He points to three particular excerpts from recent corporate transcripts:

• TGT: "As it did throughout last year, pressure from inflation and rising interest rates affected the mix of retail spending in Q1, with a further softening in discretionary categories in the March and April time frame. This coincided with the deterioration in consumer confidence, reflecting recent events such as the banking crisis that emerged in March. These continued signs of caution among consumers have reinforced why we enter"

•  WMT: "The first quarter, the way that progressed is we saw moderation as we went through the quarter. February was stronger than March and April were, a bit of a tick down...This quarter has started off basically how the last quarter ended"

•  COST: "Historically...we've always seen, when there's a recession, whether it was '99 or '00 or '09 -- '08, '09, '10, we would see -- some sales penetration shift from beef to poultry and pork. We have seen some of that now. We have seen some of that now. I think anecdotally, I heard a few months ago from our Head of Food and Sundries buyer, that we saw some switch even to some canned products like canned chicken and canned tuna and things like that."

• FL (foot locker): "...our sales have since [March] softened meaningfully given the tough macroeconomic backdrop, causing us to reduce our guidance for the year as we take more aggressive markdowns to both drive demand and manage inventory."

Picking up on this theme, Goldman consumer specialist trader Scott Feiler writes that "Today Feels a Little Bit Different" as "we have shifted from misses in companies that have historically mainly had execution missteps and idiosyncratic issues to disappointments from the bellwethers who have not." And given that shift, he says that it feels like the "paid to fade" theme in consumer will remain intact.