US retail sales tepid in May

Retail sales increased at a slower-than-expected pace in May as high interest rates and inflation continued to weigh on consumers. According to data released by the US Department of Commerce, retail sales in May increased by 0.1% MoM, lower than expected. Core retail sales, excluding auto sales, dropped 0.1% MoM. Within the report, gasoline stations led the declines, falling 2.2% from the month prior. Sales at furniture and home stores were also a laggard with sales falling 1.1%. Meanwhile, sporting goods and hobby stores were the biggest gainers, with sales rising 2.8% from the month prior. Online outlets reported a 0.8% increase, while bars and restaurants saw a 0.4% decline. Sales at clothing and accessory stores rose 0.9%, while electronics and appliance stores posted a 0.4% gain. But business at building material and garden supplies fell 0.8%.

A strong job market and rising wages have fueled household spending, but spending remains choppy in the face of rising credit costs and still ‘high’ inflation, though it has eased. 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 5,300-5,600 points.

In terms of industry, the pharmaceutical sector has a high growth rate and great market space in the medium to long term, investors could pay attention to relative companies.

Eli Lilly(LLY.US)’s first quarter performance reflects solid YoY revenue growth with strong sales of Mounjaro and Zepbound. Revenue in Q1 2024 increased 26% to US$8.8 billion, driven by increases of 16% in volume and 10% due to higher realized prices. The volume increase was primarily driven by growth from Mounjaro, Zepbound, Verzenio and Jardiance. Net income amounted to US$2.2 billion, up 67% YoY. Gross profit increased by 33% YoY to US$7.09 billion in Q1. GPM was 80.9%, an increase of 4.3 percentage points.

In terms of products, Mounjaro revenue reached US$1.81 billion, up 218% YoY. Trulicity revenue decreased by 26% YoY to US$1.46 billion, mainly due to decreased in sales volume on supply constraints and competitive dynamics. Verzenio revenue increased by 40% YoY to US$1.05 billion. Zepbound revenue was US$517.4 million. The volume growth of Zepbound was linked to available supply. Due to the strong performance of Mounjaro and Zepbound and greater visibility into the company’s production expansion, the Mgt increased FY24 revenue guidance by US$2.0 billion to the range of US$42.4 billion to US$43.6 billion. It is recommended to buy at US$857, target at US$999, and stop loss at US$822.

Novo Nordisk(NVO.US)’s net sale amounted to DKK65 billion. Operating profit increased by 27% YoY to DKK31.8 billion. Net profit amounted to DKK25.4 billion. Sales within Diabetes and Obesity care increased by 25% YoY to DKK 61.0 billion, mainly driven by GLP-1 diabetes sales growth of 30% and Obesity care growing by 41% to DKK 11.0 billion. Rare disease sales decreased by 4% YoY.

In the first quarter of 2024, Novo Nordisk successfully completed the FLOW kidney outcomes trial with semaglutide 1.0 mg. Furthermore, Wegovy was approved in the US for cardiovascular risk reduction in people overweight or obese with established cardiovascular disease, whilst Awiqli, once-weekly insulin icodec, was recommended for EU approval. Looking forward, sales growth is expected to be 19-27%, and operating profit growth is expected to be 22-30%. It is recommended to buy at US$138, target at US$160, and stop loss at US$132.