Baker: Defensive retailers are doing well, as consumers are spending on needs vs. wants

Accounting Changes & Gross Margins - Walmart's gross margins are expected to appear strong in the upcoming report due to a change in accounting methods related to tariff costs [1] - The impact of this accounting change is expected to be temporary and reverse over time [2][4] - Analysts understand the reason for the margin increase and will not project it forward, expecting it to normalize in future quarters [3][4] Consumer Spending & Retail Performance - Overall retail sales remain strong, indicating continued consumer spending [6] - Consumers are prioritizing spending on essential needs rather than discretionary wants [7] - Defensive retailers, particularly those in auto parts and grocery, are outperforming discretionary retailers [5][7][8] Defensive vs Discretionary Retailers - Defensive retailers like Dollar General, O'Reilly Auto, Walmart, Kroger, and BJ's are performing well [5][7][8] - Ulta Beauty is an outperformer in the discretionary sector due to easing competitive pressures [5][9][10] - Most defensive retailers tracked (10 out of 12) have outperformed the market year-to-date [11] - Costco, considered a defensive retailer, has underperformed the S&P 500 year-to-date, with its stock up approximately 7% [11]