April Retail Sales Reveal Confirmation Layers for These Portfolio Holdings
Also factoring into Thursday's market action are cautionary comments from Fed Chair Powell and Walmart remarking that tariffs are 'too high.'
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We’ve seen a bevy of developments this morning, and the combination is leading the market to give back some of its recent gains. Given the state of the market we discussed in today’s Pro Portfolio opening comments, we’re not surprised. But remember, other developments at play could lead the market higher in the near term. As those play out, we’ll adjust the Pro Portfolio as required.
The developments impacting the market this morning include a weaker-than-expected print for April Retail Sales and Fed Chair Powell cautioning that supply shocks could provide some challenge, potentially leading to interest rates being — you guessed it — higher for longer. To that list, we can add Walmart’s WMT comment that President Trump’s tariffs are “too high” and it will raise prices on some items to offset higher costs. To be clear, Walmart did praise Trump’s tariff rollback from 145% on goods from China but remarked that the current level of tariffs is still “too high.”
That proclamation, likely to be repeated in the next few weeks as other retailers report, suggests the deflation found in today’s April Producer Price Index report isn’t likely to last. The rebound in oil prices off their lows last week is one reason to suspect that is a likely scenario, while the impact of port cargo declines and the rise in shipping costs are others. The World Container Index for a 40 ft container saw the Shanghai to LA price rise by 16% week over week to $3,136, the highest since early March. The trip from Shanghai to NY jumped 19% to $4,350, the highest since late February. We’ll add that index to our list of things to watch as we size up retailer margin guidance.
The April Retail Sales Report: More Costco and Amazon Confirmation
On a sequential basis, headline Retail and Food Service sales rose 0.1% in April compared to March, while Retail only fell 0.1% sequentially. That would imply slower spending and the potential for consumers pulling forward some of their spending. However, when we look at the data on a year-over-year basis, April retail-only spending climbed 4.7% year over year, down modestly from the 5.0% pace in March.
Comparing that April figure against Costco’s COST confirms the big box retailer continues to take wallet share. We also find support for our position in Amazon AMZN as non-store retail sales accelerated to 7.5% year over year in April, up from 6.1% in March.
As we think about those and other data points in the report, we do have to remember the timing for Easter this year (April 20) vs. last year (March 31). That would help explain the acceleration in food service & drinking place retail sales in April, up 7.8% vs. 6.8% in March, as well as some of the sequential increase in digital shopping.
Pulling the lens back a bit, total retail and food service sales were unchanged at 5.2% in April on a year-over-year basis. Parsing the trailing three-month figures, that’s up from 1.7% in February, and the lack of a falloff in April suggests that despite headlines over cautious consumers, they continued to open their wallets. From a Portfolio perspective, that brings some support for our position in American Express AXP.
At the time of publictaion, TheStreet pro Portoflio was long COST, AMZN and AXP.
