We will not publish Monday Morning Demand Notes on December 2 as we take an extended break over the Thanksgiving weekend. Here’s to an enjoyable holiday for you and yours!
The Scoreboard
Commentary
- Last week we learned that… Walmart’s value proposition continues to appeal to consumers across the income spectrum. America’s largest retailer and grocer posted solid Q3 results, with same-store sales up 5.3% year-over-year, the best showing in five quarters. And, the company increased full-year guidance. As has been the case all year, upper-income households are helping propel performance. According to The Washington Post:
- Shoppers from households earning more than $100,000 made up 75% of Walmart’s market share gains in the third quarter, CEO Doug McMillon said Tuesday during the company’s third-quarter earnings call. That could position Walmart for a successful holiday season. “The fourth quarter will be fun to watch,” McMillon said, adding the company expects “it will be similar to the kind of momentum that we’ve seen in the first three quarters…” The Bentonville, Arkansas-based retailer raised its full-year forecast from 4.8% to 5.1% sales growth.
- Walmart stock finished the week at a new high of $90.91 per share – up 72% year-to-date.
- Meanwhile, things aren’t nearly as bright at Target, which traditionally captures a lot of middle-to-upper-middle-class dollars. Same-store sales increased by just 0.3%, with soft discretionary spending cited as an issue. According to CNBC:
- On a call with reporters, CEO Brian Cornell said “lingering softness in discretionary categories” and costs associated with rushing shipments and preparing for the short-lived port strike in October hurt the company’s quarterly performance. COO Michael Fiddelke said. “It’s disappointing that a deceleration in discretionary demand combined with some cost pressures have caused us to take our guidance back down after raising it last quarter.” But he added that Target feels confident in its long-term outlook.
- Target stock closed Friday at $125.01, down 12% from the beginning of the year.
- With that, the 2024 consumer story continues – tighter spending in the face of lingering inflation, an environment that’s not especially constructive for food demand.
McDonald’s is modifying and extending its value offerings in a way that could help cheese demand. The “$5 Meal Deal” will continue into the summer. A companion offering may prove more interesting from a cheese perspective. According to Nation’s Restaurant News:
The new Buy One, Add One for $1 offer allows customers to mix and match their favorite items. The McValue Breakfast Buy One, Add One for $1 menu items include the Sausage McMuffin, Sausage Biscuit, Sausage Burrito, or Hash Browns. The lunch items include a 6-piece Chicken McNuggets, Double Cheeseburger, McChicken, or Small Fries.
The Double Cheeseburger has two slices of cheese, unlike the McDouble that is part of the $5 Meal Deal, which has only one slice. Plus, the deal will entice consumers to double up on their Double Cheeseburgers. In the Phoenix area, the Double Cheeseburger goes for $4.09, so the deal would make it 2-for-$5.09. We’ll see if that moves the needle in a way that the $5 promotion has not.
Republicans feel better, but their newly buoyant mood wasn’t enough to turbocharge overall consumer sentiment. The final November reading of the University of Michigan Consumer Sentiment Index landed at 71.8, down from the preliminary reading of 73.0 and expectations for the same. The index for self-identifying Republicans came in at 69.1, the highest since late 2020. That was behind Democrats, who clocked in at 81.3. While overall sentiment is well above the 2022 lows, it’s behind the 10-year average (82.7). Sentiment was still up from October to November (71.8 versus 70.5) and year-over-year.
New York Fed data showed credit card balances reaching a new all-time high in Q3. The outstanding total was at $1.13 billion, up 4.6% on the quarter and up 14.5% year-over-year. Delinquencies leveled out, however, with 8.8% of accounts newly in arrears, down from 9.1% in Q2., and 7.1% at 90+ days, down from 7.2%. Rapidly expanding credit use hasn’t been a big problem so far. And initial delinquencies are still quite a bit lower than the 2008 peak of nearly 14%. At the same time, the story could take a turn for the more problematic if, for example, labor markets turn south.
Thanksgiving timing differences are jostling retail and food service measures. Last year, Thanksgiving fell on November 23. This year, it’s essentially a week later. That’s rendering scanner data useless, with popular seasonal items such as butter showing major declines for the week ending November 17 (which was the week before Thanksgiving last year). We presume that Circana data will show big gains for the week ending November 24. Grocery and restaurant traffic numbers look skewed, as well, with the former up and the latter down.
Butter promotions pick up this week, as anticipated. According to USDA, a total of 12,737 stores are featuring butter, up 16% on the week and up 26% year-over-year. Average price drops to $3.67 per pound, down 37 cents on the week and down 6% year-over-year. Cheese promotions accelerate, too, with deals on six-to-eight-ounce shreds in 14,512 outlets, up 32% on the week and up 38% year-over-year. Average price: $2.48 per package, down three cents on the week but up 5% year-over-year.
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