Over the past few years, one of the areas I've written about intermittently has been the relative performance of the stocks of companies with either a male or female consumer orientation.
It's been almost nine months since I last addressed the issue, and since one of the critical factors I've discussed that determines the potential for each group -- household formations -- has moved from a near-record low to a rate well above the long-term average in the past year, this is a good time to do so.
In brief review, the original thesis was that the stocks of companies with a primarily male consumer base outperform those of companies with a female base of consumers when household formations are low, and that the process reverses when household formations rise as both disposable and discretionary income is diverted to family needs.
Also, since most household spending decisions and actual spending are carried out by women and the companies with a primarily female-oriented consumer base are also the ones with consumer products more closely aligned with family needs, as household formations increase it is logical that the stocks of the companies serving family needs would appreciate faster than those with male-oriented products.
In the past nine months, this trend has indeed begun to evidence itself in the relative performance of the two groups as they have both been appreciating at close to the same rate vs. the male-oriented companies outperforming in the past.
Further, the performance of the stocks in both groups, with the exception of one stock in each, has outperformed the S&P 500, which has had a trailing nine-month return of about 6.3%
The past nine months' performance for the male-oriented stocks has been:
-- Anheuser-Busch InBev (BUD) +11%
-- Boston Beer (SAM) +17%
-- AutoZone (AZO) +29%
-- Home Depot (HD) +25%
-- Harley-Davidson (HOG) -11%
-- Snap-On (SNA) +25%
-- Sturm, Ruger (RGR) +8%.
The performance of the female-oriented stocks has been:
-- Lululemon Athletica (LULU) +59%
-- Coach (COH) +2%
-- Macy's (M) +9%
-- Nordstrom (JWN) +9%
-- Williams-Sonoma (WSM) +19%
-- Bed Bath & Beyond (BBBY) +15%
-- Starbucks (SBUX) +33%
There are seven stocks in each group. If we remove the best- and worst-performing stock from each group and consider the remaining five in each, the aggregate positive performance of the men's stocks has been 86%, a 17.2% average gain, and the women's has been 85%, a 17% average gain.
They are very similar, with the outperformance of the male-oriented stocks no longer being greater, and both are much greater than the S&P 500's 6.3%.
The female/family stocks catching up to the male stocks may be evidence of the shift toward family consumption that is in keeping with the increase in household formations.
There's a problem, though.
Even as the performance of the stocks in both groups has been excellent over the past nine months, it has occurred simultaneously with a pronounced deceleration in retail sales growth that is ongoing and was evidenced again today in the Johnson Redbook Index, and which is also evident in almost every other economic report, as I discussed a few weeks ago in the column "Negative Pattern to Economic Reports."
A rapid deceleration in retail sales occurring simultaneously with the outperformance of retail stocks, regardless of the gender issue and household formations, is perplexing to me and I don't know of a rational explanation for it.
Even more perplexing is the fact that the dismal first-quarter GDP performance is showing signs of continuing in the second quarter, with the Atlanta Fed's GDPNow model forecasting an annualized rate of growth of just 0.7% in Q2 and revisions to Q1 expected to show a contraction occurred during the quarter.
More disturbing with respect specifically to retail sales and the performance of the stocks we're discussing is that year-over-year (YOY) growth in retail sales so far in Q2 is even lower than Q1 at 1.74% vs. 2.76%, and it's half of the rate from the same period last year, which was 3.54%.
And those are nominal figures.
Once adjusted for inflation, retail sales are showing no growth YOY, which is also consistent with stagnating wage growth during the past year, with both being at recessionary levels by definition.
The big question is why are these stocks continuing to outperform the S&P 500, and beyond that, why aren't they all in decline?
I don't know the answer, but I'm going to continue this tomorrow in a review of the performance of the branded and unbranded apparel retailers.