Ryan Craver, Founder & CEO of Commerce Canal joined Benzinga's Premarket Prep team to discuss retail stocks.
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00:00Do you think the CPI data is real?
00:02Ryan, I'm going to ask you, do you think they account for everything in there and they've
00:05got it all perfect and it's really, inflation is really only 2.8% right now.
00:09Do you really feel like it's 2.8%?
00:12Absolutely not.
00:14Especially within food, food especially, it's rampant, rampant with shrinkflation, rampant.
00:23Shrinkflation's out of hand.
00:24They've now stopped raising prices, they just make the products smaller.
00:28That's where they're doing it.
00:29Because they know the CPI doesn't account for it too.
00:31They don't do it right.
00:32I totally agree with you and I think the one major benefactor, well two, is Walmart and
00:40Costco.
00:41So they are the ones that are seeing a large percentage of growth because food continues
00:47to grow in terms of price and shrinkflation.
00:50So they're making more yield on a smaller package and then they're also increasing the
00:57frequency with which they purchase it.
00:58So everyone talks about trading down but it's trading down only in size, it's not trading
01:04down an actual brand within the food sector.
01:06So does this party in Costco, Walmart continue because we've got all-time highs at Walmart.
01:12Costco is basically on all-time highs actually due to reports.
01:16Costco's reporting tomorrow night.
01:18So is it tomorrow night or tonight?
01:20Actually it's tonight.
01:21Costco reports tonight.
01:23What do you think first off ahead of the Costco report?
01:26We'll throw you under the bus here.
01:27Try to predict the Costco report for us Ryan.
01:30I think Costco is going to continue to show stable numbers.
01:36Now remember Costco is held up by that big moat of the membership base that is 90 plus
01:43percent renewal rates.
01:46So I think to short term trade it, I believe it's basing again.
01:51Keep in mind the same every time we've spoken about it, trades at a premium, right?
01:57Like it's at a very high premium.
02:00If you're going to hold Costco longer term, I think it's definitely a buy but longer term,
02:06I think just trading it based on earnings wouldn't make a lot of sense.
02:10The great thing about Costco right now is their international story continues to perform.
02:16They're definitely saturated in the US in terms of store base, yet they still are growing
02:21their comp sales, but the international play is still going.
02:25Where are they growing internationally?
02:27So for the most part, it's crazy, but they have an extreme success story in China.
02:34They're also picking up a lot of market share within Australia.
02:40Australia is a small market relative to the rest of these markets, but they're doing really
02:43well.
02:44I think they're going to perform really well in the UK.
02:48In Canada, arguably them and Amazon dominant, continue to steal market share from Walmart.
02:55So their model works.
02:58It's not going to work in Paris.
03:01I'll tell you why.
03:02Because like all the apartments and everything is so small.
03:07Like when we go to Costco, you buy all this stuff and you need to store it.
03:12I mean, it's just those small places, but Costco due to report.
03:17Just before we get more into individual stocks, we've been talking about the consumer and
03:21Dennis has said, hey, we've accepted inflation and whatever rate it is, if the smaller packages,
03:28I mean, you deal directly with the people that sell to the consumer.
03:32What I mean, are they just like, hey, let's just keep the ads out.
03:35The money's rolling in here.
03:37Or is there any, any caution in, in like the ad spend?
03:42There's definitely some caution in the ad spend.
03:44So we have seen a number of brands pull back on the ads that they're pushing.
03:51With that said, if they are pulling, if they aren't pulling back, they're moving a lot
03:57of it over to Amazon and meta.
03:59So they're pulling from Google is generally what we've seen in terms of top line weakness.
04:06We have seen it in certain pockets.
04:09Home continues to be relatively slow.
04:12Apparel is not slow on a unit basis, but a lot of people are trading down and playing
04:17in brands that are a little cheaper.
04:20So the branded plays are having a little bit of difficulty, but food continues to be incredibly
04:26strong.
04:27We see the restaurant services still stealing share of wallet from, from the tangible goods.
04:38What about the dollar stores?
04:41Dollars, dollar stores, dollar stores, pretty rough department stores, pretty rough.
04:48If we look across the major retailers, the ones that I still see pretty, pretty good
04:54Outlook, Costco, Walmart, I think Amazon is going to be tough on the top line, but
05:02I was just at their Seattle summit last week where there was thousands of sellers.
05:07Their services play is just amazing right now.
05:09So they're trying to take more and more share and supply chain services from some of the
05:16warehouses and things like that doing really, really well.
05:20I think if we start to look outside of those top three, there are a couple of names that
05:26it's going to be interesting to see how their earnings come out.
05:29TJ Maxx, Ross, Burlington, Ollie's, all those value plays, but I wouldn't steer clear of
05:36anything in department store and in dollar store.
05:40There's such a separation and there always has been, maybe, you know, with off price,
05:45like you've talked about this for years coming on our show, Ryan, but I just look at like
05:49all the department stores of yours talk like Kohl's and Nordstrom and Macy's and all those
05:53stocks are in the gutter.
05:55Then you have Dillard's, which just, you know, always defies gravity to a certain extent.
05:58But like you said, TJ Maxx right up near all time highs, Burlington still doing well over
06:03the course of the last year, off price retailers still doing well.
06:07That trend just continue?
06:09It does continue.
06:10So I don't want to simplify retail, but it's basically once you start growing your store
06:17account, you no longer have the growth story.
06:19Department stores have continued to cut and cut and cut in terms of their store base.
06:26I think we're even starting to see some difficulty in names that have slowed their store
06:30account. So like the five below the world, but the TJ Maxx's, the Ross's, the Burlington's,
06:35they continue to open new stores and continue to enrich the store base that they have now.
06:41A lot of what people have been scared about, about them in the past was that they have
06:46no e-commerce story, right?
06:47None of them are selling on e-commerce, but we can see that off price is incredibly strong.
06:53People are going to stores and are buying.
06:57There's a few turnaround stories that are pretty interesting, like the Abercrombie's of
07:03the world. But I don't see anything within the department stores or dollar stores that
07:09looks compelling.
07:10What about Nike, Ryan?
07:12Oh, oh, you know, so I've been looking to bottom feed on Nike, Starbucks and Lulu.
07:21Those are the three, those are the three like household retail names that have been
07:25beaten down that I've also been looking.
07:27I mean, Starbucks, not Starbucks.
07:30Well, Starbucks got beaten down.
07:32Starbucks got slammed and then they got the new Chipotle CEO and it popped.
07:36So I've no longer thought to pull in a position.
07:41I think I think the difficulty with Nike is right now they have zero growth story, right?
07:49They got on that's kicking their ass.
07:51They got a low, which is now pulling into shoes.
07:56They've got Hoka, which continues to perform relatively well.
08:00They've got no secondary brands like they did in the past to try and propel them
08:05forward. So I'm looking at it, but I was looking at it when it was down in the
08:10seventies. Now that it's popped with the optimism of the new CEO, I think it's
08:16difficult to take a position now until he comes out with kind of his story.
08:21I think they cut too much by, you know, pulling out of all that wholesale.
08:27So I just don't I don't think the story is there just yet.
08:32Lululemon, to me, still looks interesting despite the competitive set.
08:38Is there a turnaround story here?
08:41There's a turnaround story if they can push international.
08:46International is just so small as a percentage of the overall business today.
08:50But I think that that's what we'll start to see the CEO lean into as long as he can
08:56make a compelling statement of how he can grow that business.
09:01I'm continuing to look at it.
09:02It hasn't seen any pop yet.
09:05So I think that one's really interesting.
09:07The one other one, and this one is always controversial when I bring it up, is
09:11Target. I still think that Target CEO, Brian Cornell, I know he's loved by Wall
09:17Street. I think there has to be an activist play at some point that propels it
09:24forward to say that, you know, they need turnover in the C-suite.
09:30I just think it's time.
09:32I think someone else new needs to come in and, you know, whether it's an Elliott
09:35management or someone like that, to come in and say, look, we need some sort of
09:42activism on that stock.
09:44I think there's probably some plays in consumer that look interesting.
09:50So I don't know if we've ever talked about Celsius Holdings.
09:55Oh, let's go there.
09:57Let's go there.
09:59So CELH, from our market share data that we're pulling, they are definitely
10:05losing share on Amazon.
10:08They're fighting hard against Red Bull.
10:11They're fighting hard against Monster.
10:15Yes, they got the number one spot, but they're clearly having difficulty with Amazon.
10:20Amazon's one of their largest retailers that they're selling now.
10:24So I think Costco numbers should be interesting tonight to understand how Celsius
10:30might play. I've been looking at that one since it's dropped, but clearly they haven't
10:34shown any base.
10:35I think there's still some more downside, but eventually maybe look at that one.
10:42They want to know Shopify in the chat, too, because you've talked Shopify on this show
10:47positively a lot in the past.
10:48Are you still positive on Shopify?
10:50Still positive on Shopify.
10:52I mean, if you want to do any direct-to-consumer business, dot-com business, it's the
10:57name. I think that Magento, which is owned by Adobe, is still, you know, it's not a
11:04play. It's not gaining any significant market share.
11:08Shopify continues to do pretty well.
11:10Longer term hold.
11:13Definitely a longer term hold.