Consumer

Tracking the short term data is always a messy affair. The data is noisy, distorted by weather, holidays and the occasional error by those filling in the forms. That said, the tone tells a tale. The soft shift in patterns allows insights to be gleaned. When it comes to the economy, there is evidence across the piece: life is getting back to normal. Albeit a new normal with less commuting and more me-time, but a new normal where old habits like eating out, flying and taking the Mustang out for a putter are back in vogue. When it comes to the virus, it’s fading. Hospitalisations are down, so too deaths. And demand is picking up. When it comes to consumer activity the data is as clear as the Biden administration’s plan on spending big money. Clear as day. Google mobility data show increased visits to workplaces, shopping malls and leisure locations. Diners on OpenTable are just shy of their 2019 level, helpful for many companies like US Foods. Indeed the co-owner of the three Michelin-starred restaurant Alinea, tweeted this week that the waiting list was now into the thousands. He was ‘shocked’ by the demand. Hence, perhaps, why the local Wendy’s drive through is also seeing a decent turn up in trade. Air passenger traffic continues to tick up, near on 70% of pre-pandemic levels, and gasoline demand is pretty much back to normal. And is likely to see continued strength over coming months as the summer driving season chugs into view. Many trends have improved, whilst others wane. Stocks that are geared into the general get-back-out-there consumer are in demand, others less so. Like Peloton. The iconic branded, in-home cult bike operator that allows you to sweat it out in your spare room egged on by a good looking instructor in equally tight lycra. Analysts can get a bit twitchy about the valuation of companies like Peloton, companies that are at the vanguard of a new consumer trend; more so when the company has to recall product. Peachy multiples are not ripe for the sort of negative headlines and production hit of a product recall, but the bulls are likely to shrug it off. On a recent call the CFO Jill Woodworth had this to say: “We sell bikes to consumers who trial in the hotel, and then they go home and they purchase. In fact, I think the latest I saw was that for every bike we placed in a hotel, we sold at least 7 bikes to a consumer as a result of that’. And that’s just in hotels. When you factor in the opportunity in areas such as corporate accounts, it makes it very hard for analysts to properly ‘size’ the opportunity. Yes the near-term valuation appears optically full, but given the quality of the product, the strong brand and capable management, the growth prospects in a fast evolving market could be significant. Albeit growth prospects, for those itchy sell-side analysts, that are somewhat difficult to quantify.