The latest Wall Street survey of U.S. shoppers suggest many of our consumer-facing stocks are in a strong spot for the current economy. A key theme from investment bank Jefferies’ survey of more than 1,000 U.S. consumers is that spending behavior is much different across income cohorts, which could “result in a more bifurcated recovery ahead,” the analysts wrote to clients Wednesday. Perhaps unsurprisingly, higher-income people are demonstrating resilience in their spending, the survey found. But with years of elevated inflation taking its toll, “value-seeking behavior is prevailing, and should sustain near-term,” analysts wrote. The Club stocks identified by Jefferies as its top ways to play the current economy fall on both ends of the spectrum. Consumer staples giant Procter & Gamble and Mexican beer king Constellation Brands were touted as companies with the least exposure to shoppers trading down to cheaper alternatives and private-label brands. The firm has buy ratings on both stocks. PG STZ 1Y mountain Procter & Gamble’s stock performance compared with Constellation Brands over the past 12 months. We’ve long viewed Procter & Gamble as a solid consumer play that can perform regardless of the economic environment. In May, when the stock was a few bucks higher than Wednesday’s levels, we trimmed some shares into strength following its third-quarter earnings on April 19. P & G did face a period of volume declines, but its most-recent report showed a highly encouraging sequential improvement. Constellation Brands’ Mexican beer brands like Corona and Modelo have consistently been gaining market share despite softness facing the broader group. Still, there is some belief on Wall Street that Constellation’s July 3 earnings report could miss expectations due to the industry weakness. But as we head into the summer season – a strong time of the year for Constellation amid the warmer weather – along with expansion in supermarket shelf space , we’re hopeful that its stock can move higher. It fell more than 10% between its 2024 peak of $272.04 per share on March 27 and May 29, but it has started to trend higher this month. On the other side of the coin is TJX Companies , which Jefferies called out as one of its favorite stocks to benefit from the areas where shoppers are trading down. “Traffic trends remain strong” at off-price retailers, the analysts said. TJX 1Y mountain TJX Companies’ stock performance over the past 12 months. The growing appeal of TJX’s off-price business to both high- and low-income consumers was on display in its earnings report in late May . The release sent to the stock to new highs, and it kept on climbing in the days that followed. It’s less than a $1 away from its record close of $107.44 on June 7. Unlike many of its brick-and-mortar retail competitors who are pulling back in the current economic climate, TJX recently struck a deal to enter the Mexican market through a joint venture with an off-price chain operator in that country, Grupo Axo. Another company we own for similar reasons that not mentioned by Jefferies is Costco . We like Costco for the retailer’s ability to “drive amazing bargains” on a relatively small assortment of goods, which allows management to focus on items that offer the best quality and price, Jim Cramer said during the Morning Meeting Wednesday. The company has been reluctant to raise its membership fee during a period of elevated inflation. But it remains a key catalyst on the horizon for the stock, which closed at an all-time high Tuesday. It was down slightly in Wednesday’s session. The results of Jefferies’ survey were not especially favorable for the houseware, furniture and appliances category — part of the larger “hardline” retail segment. Still, spending expectations weren’t quite as negative when Jefferies conducted the survey in 2023, and the one stock analysts called out happens to be a Club name: Best Buy . The firm said it still likes Best Buy as a way to play the consumer electronics replacement cycle set to begin in the second half of this year. BBY 1Y mountain Best Buy’s stock performance over the past 12 months. We are bullish on Best Buy for the artificial intelligence upgrade cycle for personal computers that should start to play out. While consumers are making selective purchases, CEO Corie Barry said AI-enabled PCs should be a catalyst for company growth during the company’s fiscal first quarter of 2025 earnings webcast. That sent the stock surging in late May and continuing higher into June. After closing at almost $89 a share June 5, Best Buy has dropped about 3%. Our thesis remains intact. (Jim Cramer’s Charitable Trust is long PG, STZ, TJX, COST, BBY. See here for a full list of the stocks.) 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The latest Wall Street survey of U.S. shoppers suggest many of our consumer-facing stocks are in a strong spot for the current economy.
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