TARGET CEO: This might be the strongest consumer environment I've ever seen
- Retailers are reporting the strongest sales in over a decade, beating earnings and lifting full-year guidance.
- "We're currently benefiting from a very strong consumer environment, perhaps the strongest I've seen in my career," Target CEO Brian Cornell said.
- Jefferies analysts say there's no need to worry about the "rise of Amazon" as the e-commerce giant "isn't good at selling things non-commoditized fashion goods."
American retailers experiencing the best consumer environment in over a decade.
Companies across the retail sector, including Target, Walmart, and Nordstrom, have been reporting their strongest sales in more than 10 years, beating earnings on the top and bottom lines, and lifting their full-year guidance.
"There's no doubt, that like others, we're currently benefiting from a very strong consumer environment, perhaps the strongest I've seen in my career," Target CEO Brian Cornell said on his company's second-quarter earnings call on Wednesday.
He added: "Total sales were up 7% from a year ago reflecting 0.5 point of growth from our new and non-mature stores. Store comparable sales increased nearly 5%. And digital sales grew more than 40% in the second quarter, as guests continued to respond to a growing menu of convenience of women options, newness throughout our merchandising categories, freshly remodeled stores and a higher level of service across the chain."
The strong results led a team of Jefferies analysts, led by Randal Konik, to declare, "BUY RETAIL!" on eight separate occassions in Wednesday's note to clients.
"The consumer is the strongest since '99, companies are managing inventories very well, digital investments are paying off, real estate is being rationalized, EBIT% moving higher, ROIC up, cash flow is piling up, share counts are down massively, valuations are still cheap and retail stocks are underowned," the team wrote.
They said there's no need to worry about the "rise of Amazon" as the e-commerce giant "isn't good at selling things non-commoditized fashion goods."
Retailers have refocused capital investments away from brick & mortar building and moved head long into digital investments in areas of fulfillment, supply chain, delivery, and mobile commerce among other area.
Jefferies' top picks in the space includes Gap, Michael Kors, Kohl's, and Under Amour.