3 US Consumer Stocks Retail Investors Are Watching After The Jobs Report

A hotter than expected US jobs report and wage growth are hinting at a sturdier consumer, while also keeping rate hike fears alive. That mix of stronger paychecks and higher borrowing costs can quickly reshuffle which stocks benefit most from this labour story. This article walks through three US consumer and services cyclical stocks linked to that news and explains how the same data can create opportunity or risk depending on the business model.

The three stocks below are just a sample of how US consumer and services cyclical stocks can respond differently to stronger employment data. The full screen surfaced 12 more companies with equally detailed narratives that are not covered here.

To see the complete list and start sizing up your own highest conviction ideas, head straight into the US Consumer and Services Cyclical Stocks screener.

Cheesecake Factory (CAKE)

Cheesecake Factory is a large US casual dining group that fits neatly into the consumer and services cyclical theme, with sales closely tied to job growth and confidence in discretionary spending on sit down meals. The flagship Cheesecake Factory restaurants generate about US$2.8b of revenue, with additional contributions from North Italia at about US$360 million and other Fox Restaurant Concepts and bakery operations at roughly US$760 million combined. The stock has a market cap of about US$5.4b, placing it firmly in the large listed restaurant cohort that many investors watch as a real time read on the health of the US consumer.

For investors watching stronger US jobs data, Cheesecake Factory offers a way to track how much consumers are willing to spend on full service dining rather than trading down. The company blends premium on site experiences with growing digital and off premise sales, and has been opening new concepts such as North Italia and Flower Child. This broadens the potential sources of future earnings. However, high debt, sensitivity to wage inflation and some insider selling mean that strong demand does not automatically translate into a straightforward outcome. For investors trying to separate durable consumer strength from short lived excitement, Cheesecake Factory may warrant closer analysis.

Cheesecake Factory’s expanding concepts and solid revenue base could be masking a much sharper story about resilience to wage pressure and debt. For the full picture, see the 2 key rewards and 2 important warning signs

Shake Shack (SHAK)

Shake Shack is a premium fast casual burger chain firmly tied to consumer discretionary spending, with a footprint that leans into busy urban and leisure hubs where strong employment can keep queues flowing. The company generates virtually all of its roughly US$1.6b in revenue from company owned Shacks, which gives it direct exposure to store level economics as it scales. With a market cap of about US$2.9b, Shake Shack sits in the mid cap bracket many investors use to capture growth linked to a healthy US jobs market without venturing into very small, less established stocks.

Investors looking at Shake Shack today are weighing a fast growing, globally recognised burger brand that leans into higher income urban diners against the reality of thin margins and a rich valuation. Menu experiments, digital ordering and a steady stream of new Shacks have supported stronger comps and kept the story closely tied to healthy employment and discretionary leisure spending. At the same time, beef and wage inflation, higher rent and the cost of rolling out new formats all push on profits, which matters more when the stock trades on lofty earnings expectations. If you are trying to work out whether the premium price still makes sense in a world of higher interest rates and stubborn inflation, Shake Shack deserves a closer look.

Shake Shack’s premium burger story is growing fast, but the real question is whether the current pricing still fits the earnings path ahead. For the full picture, see the analyst forecasts for Shake Shack for what might be missing.

Southwest Airlines (LUV)

Southwest Airlines is a US focused passenger carrier squarely linked to consumer discretionary travel, with demand heavily influenced by employment and household income. The company runs a large point to point network using a single fleet of Boeing 737 aircraft and earns its US$30.1b in annual revenue almost entirely from air transportation, supported by extras such as the Rapid Rewards program, EarlyBird Check In, upgraded boarding and other ancillary services. With a market cap of about US$18.9b, Southwest Airlines gives investors exposure to US leisure and visiting friends and relatives travel in a period when strong jobs data is helping keep planes full while also raising questions about labour costs and financing conditions.

For investors looking beyond restaurants into travel and leisure, Southwest Airlines offers a way to tap strong US employment through ticket demand, loyalty credit card spending and new premium services such as lounges and paid seating. Management is working on new distribution channels, premium and basic fare tiers and operational changes that are intended to lift margins. This is happening in a context where labour talks, fuel price swings and a higher rate backdrop keep pressure on costs and financing. Dividend coverage, funding risk and competitive pressure from other carriers mean the risk reward balance still needs careful homework.

Southwest Airlines looks like a pure play on US travelers with US$30.1b in revenue, but the real story lies in margins, labour deals and funding costs. Get the analysis report for Southwest Airlines

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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