Consumers Are Opening Their Wallets, Benefitting Several Holdings
This position offers a nice pickup point, and here are two more we’re eyeing closely.
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On Wednesday, we had a positive surprise with weaker-than-expected June PPI data, and we have another one on Thursday, with the June Retail Sales report, which showed consumer opening their wallets much more than they did in May and to a greater extent than the market thought it would.
By the numbers, headline retail and food services sales rose 0.6% sequentially in June and 3.9% on a year-over-year basis. Retail-only sales climbed 0.6% compared to May, reversing the sequential declines posted in April and May. On a year-over-year basis, retail-only sales rose 3.5%, a brisker pace than the 2.8% figure posted in May.
The uptick in spending was almost across the board, save for the department store and electronic and appliance store categories. Based on third-party comments about Prime Day 2025 and related events, we should see the positive spending trend continue in the July data, but how much of that is pull forward from the back-to-school shopping season will be determined when retailers report their quarterly results in the coming weeks.
Preparing for quarterly results on Friday from American Express AXP, we see total retail and food service sales for Q2 2025 rose 4.1% compared to the year-ago quarter. While we know the monthly retail sales report is rather thin when it comes to spending on services, on Wednesday night, United Airlines UAL commented that since early July, it has seen a sequential six-point acceleration in demand and a double-digit acceleration in business demand versus the second quarter. That builds on comments from Delta Air Lines DAL for a strong fall travel season and a pick-up in consumer discretionary spending. We see that fostering an upbeat report and outlook from Amex. Still, the big item we are waiting for is the reveal of its Platinum card refresh efforts later this year, and how that could accelerate membership fee revenue growth.
The continued spending on food service and drinking places, up 6.6% year over year for Q2 2025, keeps us bullish on the shares of Dutch Bros BROS while the improved spending on clothing (+3.9%) and miscellaneous store retailers is a nice nod for our shares of TJX Companies TJX. We’ve shared that both are on our shopping list, and the recent pullbacks are potential opportunities.
Finally, as it relates to Costco COST, comparing its latest string of monthly revenue reports against the monthly Retail Sales reports leaves little question that the membership-driven warehouse company is taking consumer wallet share. That leads us to reiterate our One rating on COST shares. While the Portfolio’s position is on the larger size, we see the current level as a nice pick-up point for folks whose position is on the smaller side.
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At the time of publication, TheStreet Pro Portfolio was long AXP, BROS, TJX and COST.
