While you are basking in the glow of holding Apple (AAPL) shares going on three years, take a step back and try drilling into two of the most important earnings reports thus far ¿ VF (VFC) and Chipotle (CMG).
Bank earnings might give you an early snapshot into housing before the homebuilders and suppliers announce. Industrial earnings are always great at gauging the European and China. Apple even beat on earnings, though I think Wall Street wanted more.
When all is said and done, I view earnings reports from VF and Chipotle as pulse-takers on the health of American households, more so than Apple. Both touch upper-income households and those continuing to scrimp.
What global economic clues did these companies give in their earnings reports? The reads were mixed, but not as dire as recent economic headlines would suggest. By mixed, I mean the rich continue to get richer, while the poor are not doing a great deal better. Neither mentioned Ebola directly.
Domestically, VF's Wrangler and Lee denim businesses continue to struggle. Although VF has tightly managed inventories for each brand, the revenues were again soft in the third quarter. These brands are those sold at competitive prices at Sears (SHLD), JCPenney (JCP), and Walmart (WMT).
North Face had another strong quarter in the U.S., where it's a premium product rarely ever on discount. VF's little-known uniform business, which sells to the oil/gas/manufacturing industries, continues to track the overall employment market.
VF's sales in Asia exploded across all of the company's brands, and inventories were nicely contained. I have been looking for a slowing in China into year-end, but this report and numbers from Nike (NKE) suggest continued solid momentum. Russia continues to be a headwind for VF. I also expect McDonald's (MCD) to cite Russia as a headwind in its earnings release/call today.
Chipotle had implemented a nationwide price increase by the end of the third quarter, but same-store sales growth accelerated compared to the second quarter. Teens and the well-off love their Chipotle burritos made from responsibly raised ingredients, even as the company continues to battle with inflation in beef and avocados.
Given the strength of Chipotle's earnings, I would be very hesitant to buy shares of fast food competitors such as McDonald's and Burger King (BKW). Chipotle continues to take market share from the traditional names, as it opens more locations.
I don't believe the fast food stalwarts are adopting fast enough to healthier lifestyles. There is more to playing in that arena than sticking a few salads on the menu. McDonald's and the like will need a few kale drinks on the menu.