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High Gas Prices: Which Retailers Win and Lose, Deutsche Bank Says

Deutsche Bank's analysis indicates that high gas prices, spurred by Middle East conflicts, create a divide among U.S. retailers. Retailers like Ulta Beauty and Costco, serving higher-income customers, tend to gain as fuel costs rise, while discount chains such as BJ's and Burlington suffer from reduced consumer spending. Companies with heavy exposure to Europe, Middle East, and Africa, including Birkenstock and Nike, face risks from a strong dollar and regional economic strains. However, brands with extensive inventory, like Amer Sports and Birkenstock, are better shielded from immediate margin pressures. The findings are based on five years of historical data correlating gas prices with retail performance.

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High Gas Prices: Which Retailers Win and Lose, Deutsche Bank Says

Deutsche Bank's analysis reveals that rising gas prices, driven by Middle East tensions, benefit retailers with higher-income customers while negatively impacting discount stores, with additional risks from global exposure and currency fluctuations.

Impact of Rising Fuel Costs

  • Brent crude surged above $110 per barrel due to ongoing Middle East conflict.
  • Diesel prices exceeded $5 per gallon for the first time since 2022, increasing cost pressures on U.S. households.
  • Analyst Krisztina Katai highlighted significant uncertainty but emphasized that higher fuel costs could intensify financial stress on lower-income consumers.

Retailers Benefiting from High Gas Prices

  • Companies with customer bases skewed toward higher incomes show a positive historical correlation between gas prices and same-store sales.
  • Key beneficiaries include:
    • Ulta Beauty
    • Costco Wholesale
    • Casey's General Stores
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Retailers Vulnerable to Gas Price Hikes

  • Discount retailers and secondary destination stores exhibit a negative correlation with gas price increases.
  • At-risk companies:
    • BJ's Wholesale Club
    • Burlington Stores
    • Sprouts Farmers Market (attributed to its role as a less frequent shopping destination)

Global Revenue Exposure and Currency Risks

  • Several brands have substantial revenue exposure to Europe, Middle East, and Africa (EMEA), making them susceptible to a strong U.S. dollar and European economic pressures.
  • Revenue exposure percentages:
    • Birkenstock: 37%
    • VF Corp: 34%
    • Ralph Lauren: 30%
    • Nike: 27%

Inventory Buffers Against Margin Pressure

  • Most global brands maintain significant finished goods inventory to mitigate short-term profit risks.
  • Inventory levels:
    • Amer Sports and Birkenstock: over 200 days
    • Ralph Lauren: 195 days
    • Nike and Lululemon: approximately one quarter's worth
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