Retail sales unchanged in June from May, underscoring shoppers’ resilience

According to data released by the US Department of Commerce, retail sales in June stayed flat MoM, higher than expected. Core retail sales, excluding auto sales, rose 0.4% MoM, exceeding market expectations of 0.3%. Sales at gas stations and auto dealerships weighed down the figure. Excluding gas prices and auto sales, retail sales rose 0.8% MoM. Sales at gas stations were down 0.3%, while business at auto stores fell 0.2%, as dealerships were disrupted by a multiday outage after cyberattacks on a software supplier. Online sales rose 1.9%, while clothing and accessories store sales rose 0.6%. Department stores posted a 0.6% increase. Stores selling building materials and garden supplies rose 1.4%.

While spending was inconsistent with a host of retailers still seeing more value-conscious consumers who were trading down and generally more thoughtful about their purchases. Lower-income consumers, having spent their pandemic savings, were increasingly using credit cards to maintain consumption, resulting in higher delinquency rates and falling levels of confidence.
In terms of the US stock market, the S&P 500 index maintains a stable upward trend, and we expect the S&P 500 index to fluctuate between 5,300-5,700 points.

In terms of industry，resilience in spending by middle-class Americans and traffic to and from Olympic Games host city Paris could serve as drivers for the airline sector in the near term.

Delta Air Lines（DAL.US）reported a record Q2 revenue with leading operational performance. Revenue in Q2 increased by 5.4% YoY to US$16.7 billion, driven by strong demand and best-in-class operations. Year to date, Delta has led the industry in completion factor and on-time performance, and operated 39 cancel-free, brand-perfect days.

In terms of business segment, Premium, loyalty and other diversified revenue streams comprised of 56% of total revenue. Premium revenue grew 10% YoY, while Loyalty revenue was up 8%, driven by co-brand spending growth and increasing premium card mix. Remuneration from American Express stood at US$1.9 billion, approximately 9% higher than 2Q23. Cargo revenue grew 16% YoY. International passenger revenue was 4% higher than June quarter of 2023. Demand across the Transatlantic remains very strong, with unit revenue in line with last year’s record performance excluding the impact from the summer Olympics in Paris. Pacific and Latin America accounted for the majority of international capacity growth on continued network restoration and improving connectivity with the JV partners. It is recommended to buy at US$44.10, target at US$51.35, and stop loss at US$42.25.

United Airlines (UAL.US)’s revenue in Q2 amounted to US$15 billion, up 5.7% YoY, while net profit reached US$1.3billion, up 23% YoY. United Airlines is likely to retain profitability in the near term, as it has successfully refined its customer segmentation and premium travel offerings while prudently deploying its capacity to draw the highest profits within the industry.

Its mix of revenue has been an advantage that it expects to accelerate. Premium revenue, grew 8.5% in Q2 YoY. Basic Economy revenue, grew 38% YoY. Market share among domestic road warriors, increased during the quarter YoY. United Airlines flew the most customers for Q2 in the company’s history, carrying 44.4 million passengers, and set the record for the most ever customers carried in a day by the airline at 565,000. What’s more, United Airlines completed 34 days rated first amongst U.S. airlines for on-time departures, closing the quarter with the second best on-time departures amongst U.S. carriers. United Express achieved the lowest cancel rate for the second quarter in the company’s history. It is recommended to buy at US$46.50, target at US$54.15, and stop loss at US$44.55.