Morning Call

Consumer Daily – January 23

Consumer stocks moved up slightly on the back of mixed retail data released yesterday. Investors should watch out for the release of weekly retail store sales numbers as well as the data on existing home sales

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Watch out for new data to be released today, which includes the ICSC Retail Store Sales index and Redbook Chain Store Sales numbers. McDonald’s, Starbucks, and Discover Financial will report their quarterly earnings results today.

ETF Performance

Here's how consumer exchange-traded funds (ETFs) performed yesterday:

XLY Consumer Discretionary SPDR: +0.26%

XLP Consumer Staples SPDR: flat

Consumer staples stocks did not show any significant movement yesterday, while the discretionary sector was slightly up on the back of strong earnings and mixed data released yesterday.

Macro Data Released Yesterday:

ICSC Retail Store Index

Data released by the International Council of Shopping Centers (ICSC) yesterday suggests that same store sales fell 1.9%; in the previous week, the metric had declined by only 1%. However, comparing the data to the same week last year, indicates that same store sales were up 0.9%.

Redbook Chain Store Sales

Redbook released its estimates yesterday, for chain store sales during the previous week. The data is an important indicator of consumer spending.

Same store sales for national chain stores in the week of January 18 were up 3.1% year-over-year (YoY), compared with 2.9% for the previous week, which indicates a favorable trend despite the unusually harsh weather this winter.

Data to be Released Today

Bloomberg Consumer Comfort Index – 9:45 am EST

The Bloomberg Consumer Comfort Index measures consumer sentiment about the economy and is an indication of consumer spending. Last week’s reading came in at -5, which is the best reading to have come in the last five months.

Initial Jobless Claims – 8:30 am EST

The initial jobless claims data by US Department of Labor is expected to be released today at 8:30 am. The data, which comes along with insurance unemployment rate, reflects the level of consumer spending; consumption is inversely related to unemployment levels, and therefore, increases when unemployment falls. The number of jobless claims fell by 2,000 applications last week compared to the previous week.

Existing Home Sales – 10:00 am EST

Data for existing home sales will be reported after the market opens today. Last time around, existing home sales came in at an annualized rate of 4.9 million.

FHFA House Price Index – 10:00 am EST

Latest figures for the House Price Index, which is released monthly, will also come at 10:00 am EST, with the expectation that national home prices will increase 0.6%. Data for October 2013, which was released last month showed a 0.5% increase in home prices.

Earnings Announcements

McDonald’s

McDonald’s Corporation (MCD) will report its fourth quarter earnings results for FY13 before the market opens. Estimates for earnings per share (EPS) are $1.39 while revenues are expected to be $7.1 billion.

Starbucks

Starbucks Corporation (SBUX) will release its results for the first quarter of fiscal year 2014 (1QFY14) after the market close. Consensus estimates point towards EPS of $0.69 and revenues of $4.29 billion.

Discover Financial Services

Discover (DFS) will report earnings today for 4QFY13 after the market close. Analysts expect EPS of $1.18 and revenues of $2,106 million for the quarter.

News

Netflix

Netflix's (NFLX) stock price was up around 18% during after-market trading. This is because the company announced its earnings for 4QFY13, which beat analysts' estimates by over 15%. The company's total domestic subscribers increased to 33.4 million, beating the company's forecast of 33.1 million. For a detailed analysis of the company's stock, read "Netflix - Reel It In!".

Brinker International

Brinker International's (EAT) share price was up around 6.5% yesterday following the announcement of its results for 2QFY14. The company reported EPS of $0.58 for the quarter, which met analysts’ expectations despite the market’s concerns that the cold December weather would have depressed the company's sales.

Dish

Dish Network Corp. (DISH) gained 4.6% yesterday after it was reported that the company was the lead bidder in the wireless spectrum auction of the 1900 MHz Block.

Target

Target Corp. (TGT) laid off 475 people and announced that it would not fill 700 open job positions it had previously advertised for. The news of layoffs and the hiring freeze came in after the company announced it was planning to end health coverage for part-time employees. Aggressive downsizing reflects that the company has not yet been able to boost sales growth. For a detailed analysis of the company's stock, read "Target – Wait Till You Pull the Trigger on this One".

American Eagle Outfitters, Inc

American Eagle’s (AEO) shares are down 4% post-market as the company announced its decision to appoint Jay Schottenstein as the interim Chief Executive Officer. Schottenstein will replace Robert Hanson, whose resignation was a surprise. Hanson decided to leave the struggling apparel retailer suddenly and without any prior notice.

GameStop Corp. 

GameStop’s (GME) climbed 3% as the retailer announced that it has received additional supplies of Sony PlayStation(R) 4 systems. During the holiday season, these recently launched game consoles were quickly out of stock due to demand that exceeded the company’s expectations.

Coach Inc. (COH)

Coach’s (COH) shares tanked 6% as the company missed its earnings and revenues estimates due to dismal holiday season performance in its domestic market. On the other hand, share price of its rival Michael Kors Holding Ltd. (KORS) jumped 3% as Coach’s management conceded losing market share to its competitor.


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