The real estate market is cooling off, and people are increasingly rethinking their recent desire to purchase a new home. The frenzy of home buying sparked by the pandemic — and spurred on by federal stimulus checks and rock-bottom interest rates — launched the housing market into the stratosphere. But with both pandemic anxiety and prices easing, the market is rapidly returning to earth.
It’s no secret the cost of a week’s worth of groceries has significantly increased. The overall price of packaged goods is at a forty-year high, with the average cost of groceries alone up 12% in twelve months — the highest increase since 1979.
From June 2021 to June 2022, the price of eggs rose 33%, butter 21%, chicken 20%, oranges 11%, and ice cream 13%. Most consumers are adjusting accordingly by swapping out beef for chicken, turning to other protein sources altogether, and shopping more store brands and discount deals to keep costs low.
In such a hot market, consumer packaged goods companies (CPG) need to be both nimble and wise in their decisions. Every part of the business — from packaging and advertising to shipping and labor — is more expensive, and companies are raising prices to cover costs while also working to keep prices reasonable to avoid scaring away shoppers.
Luxury goods are, to an extent, exempt from many of the consequences of economic chaos.
“The rich keep on buying” is a prevailing belief, and it remains true thus far. Luxury goods spending was up in the U.S. and European markets even as Covid-19 restrictions contributed to falling revenue in China. The industry’s rapid post-pandemic recovery could stall with both inflation and the threat of recession rising, but industry leaders expect the market to survive, and then some.
Multiple and intermittent waves of disruption have impacted the home building industry in recent years. After more than two years of Covid-induced upheaval, home buyers and builders are now grappling with decades-high inflation. Furthermore, the U.S. Federal Reserve’s policy interest rate hike to tackle inflation is, in turn, raising mortgage rates, making home purchases much more expensive for home buyers. In this blog, we analyze the impact of these economic factors on the top five U.S. homebuilders by revenue: D.R. Horton (DHI), Lennar (LEN), PulteGroup (PHM), NVR (NVR_US), and Toll Brothers (TOL).
Tesla’s growth and margin profile is more aligned with a technology company than a traditional automobile manufacturer, which may explain why the market believes the company should trade at a relatively large premium versus its peers.
With markets showing high levels of volatility and the Federal Reserve discussing the possibility of raising rates several times this year, investors continue to be hyper-focused on where inflation will land over the next several months. Read more
Analysts are forecasting a more opportunistic growth and profitability outlook for U.S. home builders than before the pandemic started. Residential housing is experiencing record demand, as the CEO of Toll Brothers recently stated it to be the strongest housing market in his 30 years of experience. The boom is due in large part to the virus, which increased demand for additional space amid growing work-from-home and social-distancing trends. The timing of Covid-19 induced demand was aligned with an already tight supply of homes and a vast pool of potential buyers, as many millennials postponed homeownership after the 2008 recession. Record low mortgage rates also provide consumers further incentive to purchase a home, and after eight years of consecutive gains in nominal home prices, many current homeowners have profits to move up. Read more
While the world reels from the social and economic shocks caused by the Covid-19 pandemic and the measures taken to mitigate its impact, the rebound in equity markets suggests that investors are already looking forward to a return to some semblance of normalcy.
But how does the market expect that recovery to play out?
For both Nike and Adidas, the Greater China market is a strategically important growth driver, but after both companies provided updates on how their China sales were impacted during the COVID-19 crisis, analysts forecasted a more optimistic recovery for Nike than competitor Adidas. The updates provided by both companies were strikingly different, with Nike reportedly seeing excellent digital sales conversion when lock-downs began and a remarkable recovery at stores when restrictions were lifted. In contrast, Adidas said digital sales lagged during China’s containment phase and retail sales have seen a more modest recovery.
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You are probably familiar with top line and bottom line consensus estimates from the sell side, but Visible Alpha takes a different approach.
