The Real State of the American Consumer w/ Three Evercore Analysts | The Real Eisman Playbook Ep 65

Summary

Steve Eisman is joined by Evercore’s Michael Binetti, David Palmer, and Greg Melich for a broad read on the American consumer across restaurants, apparel, big-box retail, home improvement, food, and footwear. Their shared frame is that the economy is no longer cleanly “K-shaped” but closer to a “limping E”: the high end remains resilient, the low end is stressed, and the middle is starting to weaken. In restaurants, fast food is losing traffic after major post-COVID price increases, while casual dining and select chains with better value or menu positioning are holding up better. In retail, off-price and value players are taking share, Walmart and Costco remain structurally strong, and Ralph Lauren stands out as a brand that has successfully reduced discounting and moved upmarket. The panel is also notably cautious on Nike’s DTC strategy and on legacy food companies, which face structural pressure from protein, GLP-1 adoption, and changing consumer preferences.

Notes

• The panel frames the consumer as split by income, not uniform across categories.
• Restaurant demand is roughly one-third per income cohort.
• Fast food over-indexes to households under $50k, with McDonald’s around 40% from that cohort.
• Households below $100k are showing high-single-digit traffic declines year over year.
• The panel ties the drop-off to a K-shaped consumer rather than a broad slowdown.
• Fast-food same-store sales are running about negative 1% on average.
• Fast-food chains pushed pricing roughly 40% during COVID.
• Wage growth did not fully offset that pricing, creating a lasting affordability shock.
• Casual dining is outperforming because it took about half as much pricing and faced less wage pressure.
• Higher gas prices are adding pressure to disposable personal income.
• Upper-income consumers drive more than 70% of spending in the public apparel and specialty companies Binetti covers.
• The apparel market is splitting into premium winners, off-price winners, and a weak middle.
• Tax refund season was the best since COVID, but the benefits went mostly to off-price chains.
• Melich estimates his big-box and home-improvement universe at about $5.5 trillion of TAM.
• Inflation became cumulative, and consumers keep budgeting from the new higher price base.
• Even after prices ease, households remember the higher base rather than the temporary decline.
• The market is better described as a “limping E” than a simple K.
• The top quintile of American households accounts for almost 40% of spending.
• Melich says the middle has been under pressure for about 12 months.
• Value, assortment, and convenience are driving share gains for big retailers.
• AI in softlines is still early, but supply-chain and personalization use cases are emerging.
• COVID forced retailers to invest in big-data systems and better customer data infrastructure.
• Voice AI at the drive-thru and agentic AI could reshape restaurant discovery and ordering.
• Retailers are focusing on productivity and customer-facing AI, but trust remains low.
• Half of consumers still do not trust agentic AI to shop for them.
• The survey result echoes early mobile-commerce skepticism from 12 years ago.
• Ulta is treated as a strong company in a strong category, with the stock weakness framed as temporary.
• Ulta remains the beauty category’s “kingmaker” for launches.
• Lululemon is being criticized for chasing its own success with unsustainable hit-product cycles.
• Fashion brands have no birthright to share; they have to earn customers continuously.
• Lululemon is losing share to Alo and Vuori, and the trend is worsening.
• Gap’s core brand is recovering, helped by pop-culture activation and high-single-digit comps.
• Old Navy is the main profit engine but is weaker than off-price rivals.
• Old Navy competes directly with off-price and lower-end value players.
• Gap management described a specific fashion miss, not a macro issue, which suggests a fixable problem.
• Nike’s shift from wholesale to direct-to-consumer is described as a strategic error.
• Nike lost competitive information when it left the multi-brand wholesale environment.
• Nike brought back a veteran leader, but the turnaround is slower than hoped.
• Competitors seized on Nike’s distraction with modern footwear offerings.
• Hoka benefits from podiatrist referrals and easy in-store conversion.
• Hoka’s maximum-cushion position became a major footwear trend.
• Nike’s turnaround is still in progress under a new CEO and a returning veteran.
• Adidas and New Balance are adding competitive pressure to Nike.
• New Balance is now an over-$8 billion private company.
• Department stores are trading below 8x earnings, making them less compelling shorts than before.
• Macy’s core banner comped 1% in Q1 and may be nearing a survivable 400-store base.
• Department stores have improved inventories, supply chains, and in-store data systems since COVID.
• Kohl’s is generating free cash flow equal to 30% of market cap this year.
• Starbucks has turned, with US and North America comps around 7%.
• Starbucks needs 60% to 65% incremental margins to validate the turnaround.
• Starbucks needs to earn over $4 in fiscal 2028, likely low- to mid-$4s.
• Chipotle is a harder recovery story because investors do not give it a management premium.
• Yum Brands looks attractive because Taco Bell is strong and Pizza Hut could be spun off.
• Brinker is cheap at about 10x free cash flow, with Chili’s representing 90% of the business.
• Cocoa relief is a tailwind for Mondelez and Hershey through 2027.
• Campbell Soup expects 2% to 3% inflation before energy, plus another 3 points for energy.
• GLP-1s are only about a half-point headwind to food consumption.
• SNAP reductions are already cutting consumption by 1% to 1.5% in states that implemented them.
• Big food companies are losing share to small brands using TikTok and wellness positioning.
• Protein-forward alternatives are taking share in cereals and granolas.
• Older “wellness” brands are being displaced by newer wellness concepts.
• U.S. calorie consumption is down 2% year over year.
• Food companies face high payout ratios, weak balance sheets, and sub-10x multiples, limiting reinvestment.
• Best Buy has survived by trimming stores and focusing on service-led categories.
• Most of Best Buy’s assortment is still easily substitutable online.
• Home improvement is in a fourth year of weakness because housing turnover remains locked up.
• Home Depot expanded its TAM to $1.2 trillion through pro-channel investment and acquisitions.
• Lowe’s improved margins from 8% to 12% and has since pivoted into pro with more leverage.
• Costco is built on a limited-SKU membership model with low markup economics.
• Costco’s renewal rate is 92%, which helps defend the model versus Amazon and Walmart.
• Auto parts are mostly sold through professionals, not just consumers.
• Tariffs helped age the vehicle fleet to 13 years, but auto-parts comps may decelerate as price effects lap.
• Ralph Lauren cleaned up promotions, outlet leakage, and couponing to rebuild the brand.
• Ralph Lauren’s average unit price is up 60% since 2018.
• Ralph Lauren used luxury-style flagships and product mix shifts to elevate the brand.
• Ralph Lauren doubled marketing spending as a percent of revenue and pulled in younger consumers via social media.
• Ralph Lauren is turning the brand into a broader lifestyle platform, not just shelf product.
• Starbucks is back to growth, but investors still need proof that earnings will flow through.
• Starbucks’ store operating expense line makes the leverage hard to underwrite.
• Chipotle is stabilizing and may rise as marketing, pricing, and throughput improve.
• Chipotle’s throughput program adds 2 to 4 points of comp in upgraded stores.
• Chipotle has already rolled out equipment to 600 stores and wants to reach about half its base by year-end.
• Chipotle has been underpricing inflation and is moving toward 3% pricing.
• Amazon, Costco, and Walmart together account for about 24% of U.S. retail sales.
• Walmart’s membership flywheel is a key strategic driver.
• Walmart+ could reach an S-curve because 80% of U.S. households can now get fast delivery.
• Walmart could monetize household data better and narrow the ad gap with Amazon.
• The low end is stressed, the high end is fine, and the middle is weakening.
• Walmart is benefiting from consumer trade-down, which is positive for Walmart but negative for the macro read.
• Nike hurt itself by moving too quickly into direct-to-consumer.
• Traditional food brands are losing to protein-heavy, healthier alternatives under GLP-1 influence.
• Home Depot and Lowe’s are constrained by a frozen housing market and low mortgage turnover.
• Walmart’s same-day delivery capability is a major competitive advantage.