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Last week, I looked at expected earnings results from a few retail and consumer sector names. Ulta, Macy’s, and Petco were just a few of the names that grabbed my interest as I mused on everything from DIY beauty to pandemic pets and their potential to drive and impact consumer spending. As the week unfolded and results poured in, the high inflation rate we are currently under and potentially tepid consumer sentiment were two key factors I kept in mind. Here are a few names that made the earnings report winner’s circle last week.
Ulta Beauty
Although my recent Spending Breakdown revealed we treated ourselves at roughly the same rate financially in both June and July, Ulta chimed in with robust earnings on the 25th. Although some reports have us spending less on leisure or those other extras, in this down economy, one thing that isn’t falling by the wayside is our desire to look good. Ulta reported strong sales and no matter what we’re going through financially, to paraphrase Neil Saunders, managing director of GlobalData, most everyone can still factor in the cost of a lipstick:
“While the lipstick effect seems like a cliché, it is based on a truth that is still relevant, namely that consumers are very reluctant to give up little beauty treats and indulgences and, indeed, feel like these are deserved rewards for living through a more difficult time. Outside of indulgences, it is also the case that many beauty and skincare routines are very much embedded into people’s lives so there is great reluctance to cut back on any of the products associated with them. All these factors are helpful to Ulta.”
Dollar Tree/Dollar General
Cleanup on aisle 3—each of these competing discount grocery and retail shops reported solid quarterly results on the 25th. A fascinating contributor to their health this past quarter (Dollar General reported a 9% revenue increase to $9.4 billion and Dollar Tree revenue rose roughly 7% to $6.8 billion) was friends in unexpected places: the more affluent set.
On the earnings call at Dollar General, CEO Todd Vasos noted that the company hoped to see this newcomer trend continue.
“We’re in such a great position that as we continue to move forward, we believe we’ll be able to capitalize on that trade-down that we’re already seeing. And that trade-down is coming from income levels that are upwards of $100,000 which we really are encouraged in seeing a younger consumer, a little bit more affluent, and again, very digitally and tech savvy.”
Dollar Tree President and CEO Mike Wytenski echoed similar sentiments:
“We’re excited, we see third-party data that we do have a lot of new customers coming into both banners over last year. And the majority of them are at a household income of $80,000 or higher. So, we feel good about that.”
Williams-Sonoma
This top-tier home goods retailer didn’t even make my list, but nobody’s perfect. It is now, of course, on my radar from now on because I’m curious about what makes the Williams-Sonoma customer tick right now. The company reported earnings and revenue beats on the 24th, and has had strong quarters during the past few periods. One key helper, according to Cowen & Company’s Max Rakhlenko, is Williams-Sonoma’s relationship with millennials:
“Williams-Sonoma has done an exceptional job of acquiring millennial shoppers, which bodes well for outsized long-term growth and share gains. At Williams-Sonoma, millennials represent the largest percentage of sales and customers, and the median age continues to decrease.”
In sum, whether they were courting the more affluent consumer, tapping into the millennial shopper, or providing consumers with that little extra lipstick, these retailers were some of the earnings bright spots during the week of August 22.
