The financial results of retail companies for the second quarter of 2023 came as a very positive surprise compared to previous readings. The percentage of companies that made a net profit increased - from 61% to 69%. Similarly, the percentage of companies that made a profit rose from 69% to 78%. Among other things, this is a clear indication of improving US consumer sentiment. This data is confirmed by the latest reading of the Consumer Confidence Index (CCI), which reached its highest level since mid-2021. So let's consider which companies have been the biggest winners, and what can we expect going forward?
Consumer Confidence Index (CCI)
The US Consumer Confidence Index (CCI), or the US Consumer Index, is an economic indicator that measures consumer confidence in the context of the current and future economic situation in the US. It is an important indicator because it can provide clues about future consumption trends, which in turn can influence the behaviour of financial markets.
The index is compiled from a survey in which consumers answer questions about their current financial situation, future prospects and the general state of the economy. The CCI score is calculated from consumers' responses and can be positive or negative.
Source: https://www.conference-board.org/topics/consumer-confidence
It appears that, despite a drop in the index from 114 in July to 106.1 in August this year, the index as a whole remains at high levels, more comparable to periods of economic growth than to the recession we see in some European economies, among others, where the OECD Consumer Confidence Index has fluctuated at multi-year lows since the beginning of the year. This means that US consumers seem to still be confident, which could positively impact the quotations of the Consumer Discretionary Select Sector SPDR fund (XLY)
Source: Conotoxia MT5, XLY, Daily
These companies surprised most positively with their quarterly results
The top performers in the second quarter were undoubtedly key companies, including Coca-Cola European Partners, which exceeded expectations in terms of EPS and sales, showing growth of more than 91% and 89% respectively. Among companies specialising in various types of beverages, Celsius, Ambev SA and Fomento Económico Mexicano also surprised positively, with EPS growth of more than 20%. Increased prices for many products and higher consumption of non-sweetened and energy drinks were key factors that contributed to the joint increase in results.
Source: Conotoxia CocaColaEUP, H4
Walmart and P&G also reported better-than-expected financial results. From the reports of these two major retail suppliers, we learn that sales through the e-commerce channel increased and the cosmetics segment led the sales growth with double-digit results. These factors may indicate a return of consumer confidence in publishing. However, if we are going to analyse the behaviour of different groups of consumers, we need to be aware that the United States is characterised by significant wealth inequality, as reflected in the Gini coefficient, ranking it 47th in terms of income inequality among countries. For this reason, an analysis of consumer spending may not adequately reflect their actual standard of living.
Source: Conotoxia MT5, Walmart, Daily
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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