Cautious optimism in discretionary retail with Home Improvement a winner
Consumer Discretionary
Scott Mushkin turns incrementally more constructive on the 2026 outlook for discretionary retail, arguing that a gradual moderation in inflation for “have-to-have” items, lower interest rates and steady wage growth could create a better backdrop than a year ago. He sees middle-income households as the key beneficiaries and highlights home improvement as a relative winner, helped by potential catch-up demand after years of underspending on household durables. Against this backdrop, he upgrades both Lowe’s and Home Depot to Hold from Sell, almost 3 years after he downgraded them. Scott also believes the difficulties facing the in-home consumables industry could get worse in 2026 and would avoid most, if not all, the equities, especially companies such as Kroger and Target that compete directly with Amazon and Walmart, who will continue to use aggressive pricing to drive market share.
Edition: 229
- 06 February, 2026
Kroger indicates more price reductions are ahead
Consumer Staples
Scott Mushkin has been highlighting for several months that price discounting would become more aggressive by the end of 2025. His latest findings show Walmart has become increasingly willing to drive down prices and Kroger is gearing up for battle, using a part of its ecommerce rationalisation to lower prices to become more competitive. The increase in competition, unfortunately, will come with further erosion in end demand. This is related to GPL-1 coverage in Medicare and Medicaid, GLP-1 oral compounds coming to market and some additional curtailment in SNAP benefits. At the same time, the continuation of the MAHA trend will remain a headwind. This marks the beginning of what will be a tougher period for the industry, especially those such as Kroger, that have significant overlap with Walmart.
Edition: 226
- 12 December, 2025
Consumer Staples
Scott Mushkin thinks it is glaringly obvious that the company does not have enough labour in its stores, is putting off basic maintenance and has not invested enough in its asset base. While eliminating a competitor through a merger that should yield significant synergies would normally lead him to be more positive, Scott’s research around the poor store conditions and Walmart’s execution improvements being accompanied by an accelerating remodel programme, has led him to become very bearish and he sees significant equity downside despite the modest PE and EV/EBITDA multiples afforded to the stock.
Edition: 178
- 26 January, 2024
Consumer Staples
The volume declines and market share losses from a large, financially sound, supermarket chain are unprecedented in the 20+ years Scott Mushkin has been researching the industry - while he finds no “smoking gun” around exactly why the market share losses are so severe, reduced promotions (industry-wide) and some store slippage will have had an impact. Given the current business challenges, it throws into question the amount of net synergies KR will realise following its merger with Albertsons. Furthermore, vendors generally shift support away from companies that show sustained market share declines. The situation is unsustainable. TP $36 (25% downside).
Edition: 156
- 17 March, 2023