The November retail sales report is great news for the Tematica Investing Select List
Today we received a better than expected print for the November Retail Sales report, which rose 0.8% month over month compared to the 0.3% expected increase. Viewed on a year over year basis, the headline November figure, which includes retail and food sales, climbed 5.8%. Backing out food, motor vehicles and parts, retail sales in the month soared 6.3% year over year. While we’re going to focus on the retail aspect of the report, we’d note the downtick in food sales bodes rather well for our position in McCormick & Co. (MKC) shares.
In a nutshell, the overall November report was rather bullish for a number of Connected Society and Cash-Strapped Consumer positions on the Tematica Investing Select List as well as several others. With that said, let’s get to the nitty-gritty…
The three standouts in the November retail data were:
- Gasoline Stations (up 12.2%)
- Building Materials (up 10.7% year over year)
- Nonstore Retailers (up10.4% year over year)
The fact that Building Materials and Nonstore Retailers were stalwarts was not a surprise, given post-hurricane building efforts and the digital shopping data for the Thanksgiving – Cyber Monday holiday shopping period. We see these data points as rather confirming and positive for our positions in LSI Industries (LYTS), Amazon (AMZN), and United Parcel Service (UPS) and to a lesser extent Alphabet (GOOGL) shares.
The 3.6% year over year increase in general merchandise stores is, in our view, another reason to expect an upbeat earnings report from Costco Wholesale (COST) after today’s market close. As a reminder, with the shares bumping up against our $190 price target, we are in the process of reviewing additional upside. Today’s earnings report will be a factor in that analysis.
Despite the favorable November results for Sporting good, book and music stores (up 2.9% year over year), it wasn’t enough to bring the trailing 3-month total into the black. We continue to see a tough road ahead for these categories in the traditional brick & mortar environment as they feel the one-two punch of not only our Connected Society investment theme, but also Amazon flexing its muscles in an effort into private label products such as exercise and sports apparel.
Finally, electronics & appliance stores experienced a 6.4% bump year over year, clearly the strongest period in the trailing three-month period. While some of this is likely due to post-hurricane rebuilding efforts, we would note Apple’s (AAPL) iPhone X went on sale early in November and electronics was a big contributor to the holiday shopping spend.
- Our price target on McCormick & Co. (MKC) shares is $110
- Our price target on LSI Industries (LYTS) shares is $10
- Our price target on Amazon (AMZN) shares is $1,400
- Our price target on United Parcel Service (UPS) shares is $130
- Our price target on Alphabet (GOOGL) shares is $1,150
- Our $190 price target for Costco Wholesale (COST) shares is under review.
- Our price target on Apple (AAPL) shares is $200.
