Go high or go low... The final heat of 1st quarter earnings marathoners crossed the finish line last week. Setting personal records were Dollar General and Dollar Tree. But a closet-full of apparel companies Gap, Abercrombie & Fitch, and Calvin Klein looked like they still had those annoying plastic security tags on. We noticed something: High-end is winning, low-end is winning, middle-end is not.
Sad but true... The US economy has experienced serious income inequality since the '09 recession. And companies up high and down low have open arms welcoming in those masses.
- ⬆️ High-end retail: LVMH's mortgageable handbags are still flying off shelves (so is its stock). Tiffany, Lululemon, and other brands catering to well-off customers are doing well too.
- ⬆️ Low-end retail: Stocks of big dollar store chains are enjoying record results (and stock prices). So is Walmart, which has figured out how to tech-ify itself enough to keep budget-conscious customers around.
- 😬 Everyone else: A shocking 8K store closures have been announced so far this year, including Payless, Dressbarn, Gap, and GNC.
When your spending changes, so does the entire industry... Apple crushed camera stores, Netflix crushed movie rental, and Tinder crushed "a drink for the guy at the end of the bar, on me." Now Amazon Prime has ushered in recurring diaper refills. Some companies have adapted to the changes in how you shop (FedEx introduced Sunday ground delivery last week to keep up with your online orders) — But most middle-end retail hasn't.