Five interesting things that Hodges Capital research analysts discovered this week...

#1 TRADE-DOWN TO PRIVATE LABEL: According to the Private Label Manufacturers Association, from January 2022 to October 2022, private-label sales across all stores rose +10.4% from the same period the year prior, compared to a +5.8% rise for national brands. A recent survey by the Food Marketing Institute of food retailers found that 80% of them plan to increase their investment in private-label brands.  

#2 STRUCTURAL BENEFIT FOR THE WALLBOARD: Data from the Gypsum Association suggests that industry shipments increased 6% year-over-year in the December quarter. Although the backlog of new homes to be completed is expected to slow because of higher interest rates, higher utilization across the industry resulting from the structural limitations on synthetic and natural gypsum supply could result in relatively resilient wallboard profits in the near and long term.

#3 BLOCKBUSTER: ‘Avatar: The Way of Water’ is the third James Cameron movie to gross over $2 billion at the global box office, according to CNBC. Only five other films have hit this metric – the original “Avatar,” “Avengers: Endgame,” Cameron’s “Titanic,” “Star Wars: The Force Awakens” and “Avengers: Infinity War.” Reaching the $2 billion mark is a good sign for the Avatar franchise, with three more installments slated for release over the next five years.

#4 IS ORGANIZED RETAIL CRIME A REAL THING? A 2022 survey conducted by the National Retail Federation found laundry detergent to be among the most stolen items in organized retail crime, contributing to a $94.5 billion inventory shrinkage issue for the retail industry. These crimes are not as simple as a lone shoplifter pocketing a product. Instead, criminal organizations are stealing large quantities of goods and reselling them for profit, according to Business Insider.

#5 HIGHER RATES FOR LONGER: “Loan and deposit rates have not been this high since the late ‘70s and the early ‘80s. That is when Paul Volcker took rates to the low 20s and finally killed the snake, better known as inflation. This is the second fastest that we have ever raised rates in the history of our country. Our belief is that we have higher rates for longer. We’ve not even hit the 50-year average Fed Funds, and the pivot crowd will be disappointed because Powell is aware of the early pivot that Volker did in the ‘70s. Inflation was not over then, and it’s not over now.” John Allison, Co-Found, Chairman, and CEO of Home Bancshares.

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