TD Cowen has identified three hardlines specialty retailers as its leading selections, citing evidence of renewed inflation pressures across multiple consumer categories in October Consumer Price Index data. The brokerage maintained buy ratings on retailers it views as able to operate in an environment of rising prices within the auto aftermarket, home improvement and furniture segments.
October CPI data showed food-at-home inflation re-accelerating, with a 0.4% month-over-month gain after three months of weaker increases. Within food-at-home, components including beef, chicken, dairy and snacks all registered month-over-month price increases. Broader retail-related categories also displayed upward momentum - the firm noted that auto aftermarket categories, home improvement products and furniture generally accelerated on a monthly basis during the period.
TD Cowen framed its sector exposure questions succinctly - which retail categories are most exposed to persistent inflation, and how inflation could influence Home Depot's specialty retail peers.
O'Reilly Automotive (ORLY)
TD Cowen assigned a buy rating to the auto parts retailer with a price target of $110, compared with a then-current share price of $89.90. The firm's analysis of relevant CPI components showed motor vehicle parts and equipment up 0.2% month-over-month in October. Related items also rose on a monthly basis - motor oil, coolant and fluids increased 0.3% month-over-month. Service-related measures were firmer as well, with motor vehicle maintenance and repair services up 0.6% month-over-month and motor vehicle insurance up 0.7% month-over-month during the period.
Home Depot (HD)
Home Depot was also rated a buy, with TD Cowen setting a $410 price target against a comparable trading price of $351.75. October CPI data showed that tools, hardware and outdoor equipment and supplies together rose 0.1% month-over-month. The floor coverings index moved higher by 0.4% month-over-month in October, reversing a 0.6% decline recorded in September.
Williams-Sonoma (WSM)
On home furnishings, TD Cowen put a buy rating on Williams-Sonoma with a $300 price target versus a current trading price of $259.95. The furniture and bedding category exhibited notable acceleration, increasing 1.2% month-over-month in October after declines of 0.8% in September and 0.9% in August.
TD Cowen's note highlights the cross-section of CPI measures that have shown renewed month-over-month gains - from food-at-home components to several retail-related subindexes. The firm interpreted those movements as relevant to assessing relative exposures across hardlines specialty retailers and to justify its buy ratings on the three names named above.
The published note accompanying the data included an informational segment about an AI-driven chart analysis product that offers trading plans for Home Depot, claiming it can generate setups from multiple timeframes, indicators, patterns, news and fundamentals and provide entry, stop-loss and profit targets. That segment states the offering is available at a promotional price, described as 55% off for a limited time.
Investors and market participants tracking specialty retail performance amid evolving inflation readings may look to the CPI subindexes cited by TD Cowen in weighing exposures across auto aftermarket, home improvement and furniture retail businesses.