Consumers are feeling pain at the pump lately, and that hurt could soon spread to Wall Street.
According to the U.S. Energy Information Administration Report released at the start of the week, the price of a regular gallon of gasoline has spiked nearly 20 cents in the past two weeks alone.
And that’s not just mean reversion from lower-than-normal Fourth of July prices. As of today, a gallon will cost you $3.66 — also nearly 20 cents more than the price this time a year ago.
While this might be good news for oil majors like Exxon Mobil (XOM) and Chevron (CVX) — and maybe even for electric car-makers like Tesla Motors (TSLA) — it’s bad news for other companies that rely on strong retail spending. A higher price tag for gasoline, which is close to a necessity in our car-centric society, means less cash left in consumers’ pockets for other things.
Let’s take a look at five stocks that could feel the pinch from rising prices at the pump.
I don’t know about your family, but in mine, eating out is one of the first things to go when money gets tight.
That’s bad news for a handful of fine and casual dining destinations, one of which is Bloomin’ Brands (BLMN) — the company behind Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse & Wine Bar and Roy’s.
Analysts have already been expressing doubt about the casual dining sector — including other stocks like Chili’s parent Brinker International (EAT) and Texas Roadhouse (TXRH) — pointing to “sluggish sales” and the fact that the first half of the year’s outperformance was “driven by multiple expansion and not an increase in earnings forecasts.”
Indeed, retail sales numbers for June confirmed that restaurant spending has already been suffering, dropping 1.2% from the month before even as overall spending ticked up 0.4%. Add higher gas prices to that recipe, and the sector could be in for a tough time.
This is especially true for Bloomin’, which had doubled its 2012 IPO price by earlier this month but has since lost momentum, shedding 15% in the past couple weeks.
Another place that depends on discretionary spending: relatively high-end department store Macy’s (M).
While luxury shoppers — like those snatching up the hottest fashions at Lululemon (LULU) and Michael Kors (KORS) — are likely resilient to an uptick in gas prices, Macy’s consumer base is much more aspirational, and thus much more likely to feel the sting.
Of course, Macy’s has been on a roll of late, outpacing the broader market with respective year-to-date and 12-month gains of 23% and 40%. But at least part of its success has come in the face of rival JCPenney‘s (JCP) struggles, and even its strong first-quarter earnings didn’t come without warnings.
For one, Chief Financial Officer Karen Hoguet told analysts that the company was already seeing weakness among its more budget-conscious customers “amid concerns about sharp cuts in government spending and a wobbly job market,” The Chicago Tribune reported.
Once again, gas prices are only going to make that reality worse.
So far, we’ve looked at day-to-day indulgences that could be trimmed. Of course, big-ticket items — like the necessary purchases for a good ol’ summer vacation — can be put off as well.
That could weigh heavily on Choice Hotels International (CHH) — the company behind chains like Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge and others. Higher gas prices could easily cut into vacation budgets, as even the four or so hours my family drives every year to the beach itself takes a toll on our pocketbook.
Plus, the trouble with hotels especially is that there’s hardly a trickle-down effect as people cut back on spending. Folks who generally stay in upscale hotels aren’t going to downgrade to fill the spot of folks who can no longer afford their getaway.
Of course, this is all speculation, and it might be wise not to get too negative on Choice — CHH has been killing it so far this year, outpacing the broader market’s gains handily.
Along the same lines, a day at an amusement park like Six Flags (SIX) might lose some of its appeal. Not only is entry and enjoyment the park itself a discretionary purchase that could easily be cut as consumers have less cash in their pockets, but the price of driving there is also more expensive.
Six Flags has been climbing for most of the year — even in the face of similar concerns like the payroll tax hike and sequestration — to the point that it hit an all-time high back in May. Even cooler weather and heavy rain were supposed to weigh the stock down, and failed to do so.
In fact, Six Flags just reported record revenue for the first six months of the year — a whopping $451 million that translated to a 15% climb in earnings.
But the spike in gasoline prices could end up being the straw that breaks the camel’s back — or one that at least weighs on it in the near-term. Plus, Six Flags lacks the diversification of a rival like Disney (DIS) to easily weather small storms.
Last but not least, Walmart (WMT) could feel the sting from the gas spike. For the big-box discounter, having a less-affluent consumer base means its shoppers are likely feeling the recent uptick in gas prices more strongly.
Granted, you could argue that penny-pinched consumers might actually migrate to Walmart to save money. But I believe people are much more likely to simply cut back in the face of short-term fluctuations that actually change habits.
Plus, Walmart has already been lagging the market so far this year and is struggling to get any momentum. Its current-quarter earnings estimate has been sliding in the past few months, and expected full-year results have been coming down with it.
The company has pointed a finger at every imaginable factor — storms, cool temperatures, the payroll tax and more — meaning even the slightest uptick in gas prices and subsequent fall in spending is the last thing it needs.
As of this writing, Alyssa Oursler did not own a position in any of the aforementioned securities.