JaguarConsumer Weekly Callouts – February 25 (Circana, Boating, CZR, DKNG, PENN, ROST, TJX, TPX, MSOS)

Circana – For those that have been following our weekly Consumer Callouts note, its pretty evident that channel checks from all different sources are used frequently. I’m bringing this up because Circana (formerly IRI and NPD) recently launched its MULO+ data offering, expanding CPG point-of-sale coverage by approximately 15%. MULO+ is the largest expansion of the total U.S. universe since 2011 and now captures 90% of CPG dollar sales sourced from census POS data. According to RBC Capital, the expanded data set includes 11 previously untracked retailers and will now deliver both in-store and online sales insights. Some notable retail additions come from the club, eCommerce, beauty, and discount channels. In the Exhibit provided, they rank the companies that experienced the greatest difference between the previous MULO data and the new MULO+ data (based on latest 52 weeks ending 02-04-24). From a category perspective, Vitamins, Coffee, Skincare, Bottled Water, and Weight Control are seeing the largest increases. From a company perspective, Proctor & Gamble (PG), Nestlé (NSRGY), L’Oréal (LRLCY), PepsiCo (PEP), and Kimberly Clark (KMB) are seeing the largest increases.

Off-Price – In a preview note late last week, Evercore ISI said they think Off-Price had a strong holiday, and expect above-Street Q4 SSS growth for all three major names (BULR, ROST, and TJX). Admittedly, February trends have slowed, but they think it’s due to exogenous drivers (warm weather, late tax refunds). “We recommend looking past it. Exogenous impacts are about to reverse (warm weather is a positive in March, tax refunds will catch up).” Meanwhile, industry compares get easier lapping the March ’23 banking crisis, and an early Easter is a further Q1 tailwind. Contacts suggest inventory availability remains high. They expect industry store closures to accelerate (media suggests Belk, EXPR, PLCE will be closing stores) —opening up more inventory & gain opportunities for these off-price retailers.

Looking at the individual companies, they are adding Ross Stores (ROST) to their Top 5 Outperforms List and also raise their Q4 SSS to +5% from +3%. Meanwhile, for TJX Companies (TJX), they expect another solid quarter so they are raising their Q4 SSS slightly to 5.1% from 4.9%.

Boating – BMO Capital recently attended the 2024 Miami International Boat Show where they met with Brunswick (BC), Malibu Boats (MBUU), BRP Inc. (DOOO), OneWater Marine (ONEW), Patrick Industries (PATK), and Polaris (PII), as well as conducted their own channel checks.

They think overall retail sales at the show were down low-to-MSD%, with a large delta between brands/dealers. Their checks indicted that higher price-point boats continued to outperform but within those more expensive boats, brands that have long been categorized as “premium” — such as Boston Whaler, Everglades, Grady White, Sea Ray — accounted for most of the outperformance and were flat Y/Y. A frequent refrain from dealers was that “they need to sell again” and that the sales cycle is lengthening as there’s more back and forth with customers who are more patient and set on negotiating. Their conversations about the other early-season boat shows indicated that the shows themselves were okay (they estimate down low-to-MSD % Y/Y).

“Inventory levels remain heavy, especially for pontoon and ski wake. We frequently heard that dealers that are too heavy for a specific brand/product are hesitant to order elsewhere. Our most recent reading of U.S. dealer inventory, using listings on boattrader.com as a proxy, indicates industry new dealer inventory was up +42% Y/Y (Exhibit 3).”

Online Gambling – A string of headlines have impacted online gaming companies recently, JMP Securities writes in a February 23rd note. They believe the only notable impact is coming from Illinois, the second-largest sports betting state in the U.S., where Governor J.B. Pritzker is eyeing an increase in the tax rate for sports betting to help alleviate the budget deficit. The proposal comes one year after Ohio became the first state since the legalization of sports betting to increase its gaming tax rate (20% from 10%). The governor is proposing increasing the tax rate to 35%, from its current 15% of gross gaming revenue. “Assuming no growth off 2023 gross gaming revenue, we estimate Caesars Entertainment (CZR) and DraftKings (DKNG) will be the least impacted, while ESPN Bet (PENN) will see the largest impact compared to 2025 consensus EBITDA expectations.”

Bedding – Piper Sandler’s preliminary checks on Presidents Day Weekend sales conducted suggest the weekend was flattish Y/Y for mattresses. They found mixed responses for Furniture performance relative to Mattresses, but on average Furniture underperformed. Our checks revealed a wide range of outcomes (ranging from positive double-digit to negative double-digit) with most in the +5% to -5% range. The +/- double-digit outcomes seemed most driven by the Y/Y compare specific to the retailer. The weekend saw no notable impacts from weather. While feedback was certainly not consistent regarding price points, they generally heard that high-end mattresses continued to outperform. They received mixed feedback on both lower-end and middle-priced products. “All in, we believe Tempur-pedic outperformed, while Sealy seemed inline to down.”

Piper Sandler would also point out retailers will now be focused on resetting selling floors with new product during March and April. Tempur Sealy (TPX) appears well positioned for this as many retailers expect to have all new Tempur Adapt models on the floor by the Memorial Day weekend event. Conversely, while new product feedback on Serta Simmons has been positive, many expect the sheer magnitude of new product launches will push many of the new SSB model launches out to a summer launch.

Cannabis – Alliance Global Partners, on February 21st, would write in a Cannabis preview note: “We look for 4Q23 sales to largely come in at the higher end of guidance, with select MSOs seeing growth Q/Q and potential for a few beats…Bigger picture, we see a number of potential notable catalysts that could materially change the landscape of operators across our coverage. The most notable is the pending news from the DEA on a proposed rule regarding the rescheduling of cannabis, which we expect to be in-line with HHS’ Schedule 3 recommendation, with the news potentially coming any day (and we continue to point to end of 1Q24) – with the rescheduling translating to upwards of $150M+ in tax savings by our analysis, translating into immediate improved CF. We also call out geographic catalysts on the horizon, with meaningful P&L implications, including cannabis reform in Germany, along with adult-use legalization in FL (currently under state Supreme Court review tot be on Nov ballot) and PA (Gov increasing call for legalization) – with OH also looking to finalize rules to begin adult-use sales & VA potentially putting a bill on the Governor’s desk to allow adult-use retail sales to begin.”