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 The S&P 500 consumer discretionary sector index is up about 3
percent for the year, with only the S&P energy index performing
worse.
One recent ray of sunshine, however, has been the performance of
restaurant stocks. The Dow Jones U.S. Restaurants & Bars Index index
has risen about 4 percent since the beginning of September. The S&P
500 consumer discretionary sector index is up less than 1 percent
for the period.
Usually restaurant stocks correlate well with other retailers, but
at the moment consumers are showing a preference for dining out over
buying apparel, said Oscar Sloterbeck, senior managing director at
Evercore ISI.
Shares of Buffalo Wild Wings Inc, Domino's Pizza Inc, Darden
Restaurants Inc and Cracker Barrel Old Country Store Inc have all
risen sharply since the beginning of September.
A broadening job recovery and lower gas prices are encouraging
middle-income consumers to dine out again.
“The quickest path to the consumer might be through their belly,”
said Michael Arone, chief investment strategist at State Street
Global Advisors in Boston. Other discretionary stocks will also see
an effect, but with a lag, he said.
While the better performance at restaurants may have more to do with
an increased check size for the average diner, there is a growing
belief that consumer discretionary companies will see more spending
thanks to lower energy prices.
The average price of a regular gallon of gasoline is $2.914, down
from $3.186 a month ago, in the longest sustained decline for prices
since 2008, according to AAA.
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This is likely to boost consumer discretionaries in the next couple
of months, said Charles Sizemore, chief investment officer at
Sizemore Capital Management.
Retailers reported strong sales in October in an encouraging sign
for the sector, Friday data showed.
Traders in the options market, however, do not seem to be expecting
fireworks from the retail sector this holiday season.
The 30-day implied volatility, a gauge of the risk of large moves in
a stock, for the SPDR S&P retail fund was at 16 percent on Friday
and in the 16th percentile of its 52-week range, Livevol Inc data
shows.
"With overall volatility low, if consumer spending through the
holiday season turns out to be better-than-forecast that would be a
big win for anyone making that bet in the option market," said Ophir
Gottlieb, chief executive of Los Angeles-based Capital Market
Laboratories.
(Reporting by Saqib Iqbal Ahmed; Editing by Nick Zieminski)
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