Insights on Changing Consumer Spending

Facteus Insight Report on Consumer Spending and Transactions (FIRST)
Daily Consumer Spending Index

The daily US Consumer Spend Index shows the percentage change in spending on a daily basis, compared to consumer spending in 2019.

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FIRST REPORT: AUGUST 26, 2020

Consumer spending dipped back into negative territory the week ending August 23 after pushing into the positive side the prior week. All three major categories saw a year-over-year growth contract from the prior week. The strongest subcategories remain Home Supply, Video Games, and Discount Stores, suggesting we are seeing a significant change in consumer behavior since the beginning of the pandemic. That dynamic continues to be evident in the trends seen in spending at Amazon and Walmart, where the growth gap remains meaningfully in Amazon’s favor.

 

RETAIL

Consumer spending on retail slowed from the prior week, but remained positive in the aggregate, growing 29% year over year in the week ending August 23.  The biggest change came in the Discount Store segment, which saw its year-over-year growth fall from 56% last week vs 38% this week. Spending in the Home Supply sector also eased a bit, but remains extraordinarily strong, coming in a just over 50% year over year growth.

WILLIAMS SONOMA (WSM:NYSE)

Williams Sonoma (WSM: NYSE) reports July Quarter (2Q) results after the close of market Wednesday. This is a name that our panel has tracked well. The company reported a reasonable first quarter in May, with net sales flat with the prior year despite having all of its physical stores closed for half the quarter. The company pointed to its robust e-commerce performance (up to over 30% YOY) as the primary reason for its relatively strong performance. We also believe that as consumers were forced to stay at home, companies like Williams Sonoma were in a relatively sweet spot with consumers reallocating dollars to home improvement and dining in.

We have seen this dynamic in other names, where e-commerce has buoyed a multi-channel enterprise (Target comes to mind). So this relative outperformance is certainly not unexpected. However, one often underappreciated dynamic of a shift towards e-commerce is a coincident rise in revenue per transaction or “basket size.” During the three months ending July 31, consumers in our panel dramatically increased the amount they spent per transaction at Williams Sonoma, from around $90 at the start of the quarter to around $140 exiting the quarter and reaching as high as $180 in the month of July.

The increase in transaction size has continued into August It appears that WSM is in an enviable position in this economy – their products fit well with the change in consumer behavior driven by the pandemic, and it’s also getting a boost in spending often seen in e-commerce transactions vs. in person. Like many other companies, WSM declined to give guidance for the balance of 2020, citing ongoing uncertainty around the consumer economy. Wall Street estimates are forecasting roughly a 7% increase in revenue for the quarter, and investors are certainly bullish on the name as shares of WSM have tripled since their lows in March. The increase in average transaction size suggests investors are correct to be bullish, and that there could be upside to revenue for the quarter.

RETAIL: AMAZON

Both Amazon and Walmart saw year-over-year growth slow a bit from the prior week, but the narrative we have seen for most of the period since the start of the pandemic remains intact, with Amazon continuing to out comp Walmart by close to 60 percentage points.

ENTERTAINMENT

Spending in the Entertainment segment also weakened in the aggregate during the week of August 23, showing a 13% decline year over year, worsening from the 10% decline it saw the week prior. Spending in the Restaurant segment dropped 4 percentage points from the prior week, growing at 3% year over year. The Fast Food segment saw the biggest week-to-week decline, posting growth of 16% vs 24% the prior week. Spending in the Video game sector also eased up, growing 63% year over year after growing 80% the prior week.

TRAVEL

The aggregate Travel segment was largely unchanged week to week, posting a 41% decline year over year during the week ending August 23. Spending on Air Travel remains significantly depressed, with spending declines at 63% year over year. Spending on Lodging retreated a bit from the prior week, with a 5% decline year over year vs a 1% decline the prior week.

FIRST REPORT ARCHIVE

FIRST Report 10-21-2020

FIRST Report 10-14-2020

FIRST Report 10-7-2020

FIRST Report 9-30-2020

FIRST Report 9-23-2020

FIRST Report 9-16-2020

FIRST Report 9-16-2020

FIRST Report 9-9-2020

FIRST Report 9-9-2020

FIRST Report 9-2-2020

FIRST Report 9-2-2020

FIRST Report 8-26-2020

FIRST Report 8-26-2020

FIRST Report 8-19-2020

FIRST Report 8-19-2020

FIRST Report 8-12-2020

FIRST Report 8-12-2020

FIRST Report 8-5-2020

FIRST Report 8-5-2020

FIRST Report 7-29-2020

FIRST Report 7-29-2020

FIRST Report 7-22-2020

FIRST Report 7-22-2020

FIRST Report 7-15-2020

FIRST Report 7-15-2020

FIRST Report – 7-8-2020

FIRST Report – 7-8-2020

FIRST Report – 7-1-2020

FIRST Report – 7-1-2020

FIRST Report 6-24-2020

FIRST Report 6-24-2020

FIRST Report 6-17-2020

FIRST Report 6-17-2020

FIRST Report 6-10-2020

FIRST Report 6-10-2020

FIRST Report 6-3-2020

FIRST Report 6-3-2020

First Report 5-27-2020

First Report 5-27-2020

FIRST Report 5-20-2020

FIRST Report 5-20-2020

FIRST Report 5-13-2020

FIRST Report 5-13-2020

FIRST Report 5-6-2020

FIRST Report 5-6-2020

FIRST Report 4-27-2020

FIRST Report 4-27-2020

FIRST Report 4-22-2020

FIRST Report 4-22-2020

FIRST Report 4-15-2020

FIRST Report 4-15-2020

Report 4-9-2020

Report 4-9-2020

First Report 4-8-2020

First Report 4-8-2020

FIRST Report 4-1-2020

FIRST Report 4-1-2020

FIRST Report 3-25-2020

FIRST Report 3-25-2020

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