Consumer Sentiment Stuck Near Lows: Why TJX Wins When Shoppers Wait
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| By Gavin Magor |
If you've delayed a new car, refrigerator or sofa purchase, you're in good company.
On Friday, the University of Michigan said buying conditions for big-ticket goods fell 18% in October.
Higher interest rates and worries about affordability were the reasons.
That pause is bad news for some companies and good news for others.
Why Shoppers Are Putting Off Big Purchases
Consumer sentiment came in at 48.0 for October.
That's 10% lower than a year ago.
It's also 15% below February, before the Iran conflict began.
And the entire drop in how people rate current conditions came from big-ticket purchases.
Consumers now expect 4.7% inflation over the next year.
In February, they expected 3.4%.
The survey's director said purchasing power dominates how consumers see the economy.
When you expect prices to keep rising, you protect the weekly budget first and put the big purchase on hold.
Two Kinds of Shoppers
American Express (AXP) reported its third-quarter results on Friday.
Its customers spent 8% more on their cards than a year earlier.
Travel and entertainment spending rose 10%.
Nearly all customers kept the Platinum card after its annual fee rose to $895.
One portfolio manager quoted by Reuters said the strength at the top stands in contrast to lower-income shoppers.
Even American Express is tightening its own belt.
It has cut about 5% of its workforce, its first major job cuts in roughly a decade.
Its chief executive said the cuts are about efficiency, not a slowdown in the business.
American Express earns a C+ from us, a HOLD.
If your budget is stretched, waiting on a big purchase is a sensible choice, not a failure.
If you're an investor, follow the waiting.
Companies that need you to finance a new appliance face a tougher stretch.
Companies that sell everyday things at a discount stand to gain.
Fixing Instead of Buying
The average vehicle on U.S. roads is a record 12.9 years old, according to the Auto Care Association.
High prices and high rates give owners every reason to keep driving what they have.
Older cars need more parts and more repairs.
In the Weiss Ultimate Portfolio, which I edit, we hold a stock built to benefit from exactly that.
AutoZone (AZO) is the obvious way to play older cars.
But it earns only a C, a HOLD, from us.
So the theme is right, but our ratings say to be choosy about the stock.
The Big-Ticket Stocks to Watch
Whirlpool (WHR) earns a D, a SELL.
Its shares have lost more than half their value this year.
It reports third-quarter results after the market closes on Oct. 26.
Ford (F) earns a C-, a HOLD, so I wouldn't add to it here.
Our ratings don't paint the whole group with one brush.
General Motors (GM) and Best Buy (BBY) both earn a B-, a BUY.
That tells you the ratings are judging each company on its own numbers, not on the headline.
Walmart (WMT) earns a B-, a BUY.
Costco (COST) earns a B, a BUY.
Both sell the things people buy every week, and both have barely moved with the market.
Let the Ratings Do the Sorting
Every rating in this report came from the live Weiss Ratings pages on Friday.
Weiss Ratings Plus puts that same work in front of you, with real-time ratings, instant alerts and exclusive analysis.
It's how you'd know that one big-ticket seller carries a SELL while two others earn a BUY.
Click here to see what Weiss Ratings Plus can do for you.
TJX: Where Shoppers Go While They Wait
The family that skips the new sofa still needs a lamp, a pair of shoes and a birthday present.
TJX's own numbers suggest plenty of them are buying those things at a discount.
The TJX Companies (TJX) owns T.J. Maxx, Marshalls and HomeGoods.
It earns a B, a BUY.
In its second quarter, sales at stores open at least a year grew 4%, ahead of its own plan.
Adjusted earnings per share, which leave out a one-time tariff refund, rose 11%.
It also raised its full-year earnings outlook.
Its shares have tended to move independently of the broader market.
It's expected to report its third quarter on Nov. 18, though the company hasn't confirmed the date.
For my part, I expect TJX to continue with its strong customer base as long as big purchases stay on hold.
TJX is my pick for new money in this market.
What I'm Watching
- Whirlpool's Oct. 26 report, for whether appliance demand is still sliding.
- The Federal Reserve (Fed) meeting on Oct. 27-28, since lower rates are what would revive big-ticket buying.
- The University of Michigan's preliminary November survey on Nov. 6.
- TJX's third-quarter report, expected Nov. 18.
- Any change in our ratings on General Motors or Best Buy, the big-ticket sellers still holding a BUY.
Bottom Line
If you're putting off a new car or a refrigerator, you're far from alone.
That waiting is now shaping which stocks win.
Avoid the big-ticket names our ratings mark down, starting with Whirlpool.
Put new money into the stores where waiting shoppers still spend, starting with TJX.
Cheers!
Gavin
