摩根士丹利-北美零售消费信贷研究：油价上涨对非必需消费品支出的潜在冲击分析-Framing the Potential Hit to Discretionary Spend from Higher Gas Prices-20260315

MorganstanleyRESEARCH

March15,202611:29PMGMT

Retail/ConsumerCreditResearch|NorthAmerica

FramingthePotentialHittoDiscretionarySpendfromHigherGasPrices

Theconflictinlranhasincreasedmediaattention,market

volatility,andaffectedcommoditieslikeoil.Weexaminehowgaspricechangesmayimpactconsumerspendingondiscretionarygoodsbyanalyzinghouseholdexpendituredataandestimatingpotentialcutbacksforretailers.

KeyTakeaways

Risinggaspricescouldreduceaggregatediscretionaryspending~1.2%atcurrentlevelsandupto~4.2%ifpricesreach~$4.65/gal(+50%vs.2025avg),assuminghouseholdspendingcutsoffsetfuelcosts.

Lower-incomehouseholdsfacethelargestpressuresincefuelrepresentsahighershareoftheirbudgets,creatingnearlydoublethediscretionaryspending

headwindvs.high-incomecohorts.

Retailersservinglow-tomid-incomeconsumersindiscretionarycategories(apparel,footwear,home)appearmostexposed,includingKohl’s,Gap,UnderArmour,Crocs,andWayfair.

UShouseholdsspendabout$2,650annuallyongasoline(~3%oftotalspending),buttheburdenisproportionallyhigherforlower-incomeconsumersthan

wealthierhouseholds.

Economicimpactdependsonshockduration:transitoryoilspikeshaveminimalspendingeffects,whilepersistentincreasescanreducerealgoodsspendingby~90bpsafter~12months,perourUSEconomicsteam.

IDEA

MoRGANSTANLEy&Co.LLCJennaLGiannelli

Creditanalyst

Jenna.Giannelli@

+1212761-4340

RoopiBhangu

CreditAnalyst

Roopi.Bhangu@

+1212761-1912

MorganStanleydoesandseekstodobusinesswith

companiescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanley

Research.InvestorsshouldconsiderMorganStanley

Researchasonlyasinglefactorinmakingtheirinvestmentdecision.

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

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Issuersmostimpacted–Framingexposures

Webelievethatcompanieswithinourretail/consumercoverageareaareespeciallyvulnerabletorisinggaspricesrelativetoothersectors,particularlythosewithacustomerbaseskewedtowardlowtoaverageincomesandthoseoperatinginmostlydiscretionary

sectors.Althoughcompaniesinessentialgoodscategories(suchasconsumerpackagedgoodsandstaples)alsofacerisksfromconsumerscuttingback,beingmoreselective,ortradingdown,weseetheimmediateandgreaterriskinheavilyelectivesegmentslikeapparel,

footwear,accessories,andhomefurnishings.Businessesfocusedonconsumablesorneeds-basedproducts,and/orthosecateringto

higher-incomeconsumers,tendtobelessaffectedbyincreasesatthepump,assumingotherfactorsremainconstant.Amongthemostexposed,weidentifybrandssuchasVictoria’sSecret,UnderArmour,Gap,Kohl’s,Michael’s,Crocs,andWolverine,whileluxury

departmentstores,apparel,andfurnitureretailersorbrandsappearleastsusceptibletothesepressures.

MoRGANSTANLEyREsEARcH3

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Exhibit1:HigherPrices@thePump:MosttoLeastExposedCreditIssuers

CreditIssuerIncomeSkewMoreorLessDiscretionary

MostExposed

LeastExposed

Low/Mid

Low/Mid

Low/Mid

Low/Mid

Low/Mid

Low/Mid

Low/Mid

Low/Mid

Low/Mid

Low/Mid

Low/Mid

Low/Mid

Low/Mid

Average/Everyone

Average/Everyone

Average/Everyone

Average/Everyone

Average/Everyone

Average/Everyone

Average/Everyone

Average/Everyone

Average/Everyone

Average/Everyone

Average/Everyone

Average/Everyone

Average/Everyone

Average/Everyone

Average/EveryoneMid/High

Mid/HighHigh

HighHigh

More

More

More

More

More

More

More

More

More

More

Less

Less

Less

More

More

More

More

More

Less

Less

Less

Less

Less

Less

Less

Less

Less

Less

More

More

More

More

More

BurlingtonStoresKohl's

LeviStrauss

Skechers

UnderArmour

Victoria'sSecretWayfair

WhirlpoolCroc's

WolverineWorldwideSallyBeauty

Bath&BodyWorksCoty

Macy's

Michael'sStoresQVC

VFCorpGap

Carter'sEdgewellEnergizerMattel

NewellBrandsPetco

PetSmart

PrestigeBrands

Scotts-MiracleGroSpectrumBrandsAmerSports

Somnigroup

Saks/NeimanNordstrom

RestorationHardware

Source:MorganStanleyCreditResearch

PotentialHittoDiscretionarySpending

Here,weoutlinewhatvaryingincreasesrepresentasapotentialhittodiscretionaryspending,dependingontheconsumerreactionfunction(fullyself-fundwithsavingsorcredit,partiallyself-fund,orfullysubsidizefromdiscretionaryspendingcutsintheirhouseholdP&L).

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Ifweassumehighergaspricessustainnearcurrentlevels,weestimatethepossiblereductioninaggregatediscretionaryspendingof-1.2%,assumingnootheroffsetsorfactors.Ifgaspriceswentto$4.65/gallon(+50%vs.the2025average),thishittodiscretionary

spendingcouldbenear-4.2%,alsoassumingnoothermitigantsoroffsets.Weappreciatethatconsumersmaybenefitfromincreasedtaxrefundsthisyear,whichcouldneutralizetheimpactofhighergasprices.Atthesametime,itwouldalsominimizethepossibleupliftinspendingexpectedfromtherefunds.SeeourEconomicsteam'smostrecentupdateontaxrefundshere,whichareup9%YoYsofar,buttoalesserdegreethanoriginallyexpected.

Forthisexercise,welookonlyathighergaspricesinisolation.Acrossscenarios,themagnitudeofheadwindisnearlydoubleforlowestvs.highestincomehouseholdsacrossscenarios,givengasolines’higherportionofhouseholdexpendituresatlowerincomehouseholds.Byincomecohort,wecanseethatthehighincomecohorts(top40%)haveamplecushionintheirincomes,themiddle20%areroughlybreakingeven/havelittlesavings,andlowerincomehouseholds(bottom40%)areinthenegativesuggesting:1)useofcredit/debt;2)undisclosedcashwages;or3)useofsavingsonhand.

Exhibit2:ScenarioAnalysis:PotentialDeclinesinHouseholdDiscretionarySpendingatVarying%IncreasesinGasPrcies@thePump+VaryingConsumerResponse

ScenarioAnalysis:PossibleDeclinesinHouseholdDiscretionarySpending

%IncreaseinGasPrices

Implied$PriceatPump$

15%

3.57$

25%

3.88$

50%

4.65$

75%

5.43$

100%

6.20

Fullyfundedwithsavings/credit

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

25%

-0.3%

-0.5%

-1.0%

-1.6%

-2.1%

50%

-0.6%

-1.0%

-2.1%

-3.1%

-4.2%

75%

-0.9%

-1.6%

-3.1%

-4.7%

-6.2%

Fullyfundedwithreducedspending

100%

-1.2%

-2.1%

-4.2%

-6.2%

-8.3%

Source:MorganStanleyResearch

31,743

Incomebeforetaxes,reported

Disposableincome(Incomeaftertaxes),est

'Essentials'Spend

Discretionaryincome(IncomeafterEssentials)

'Discretionary'Spend

$74,474$69,809

$29,643

2,909

$42,925

$42,788

$10,747

(7,266)

15%

$104,207$89,942

$46,792

$43,150

11,407

$264,510

$211,036

$135,456

60,694

$16,658

$17,272

-$5,952

(17,774)

15%

$121,548

$108,887

$58,612

18,915

$75,58074,762

$50,27539,697

$40,16626,734

$32,04118,013

$23,22411,822

Netincome

GasPrices-HypotheticalImpact

15%

15%

15%

IncreaseinGasPrices

ProFormaAnnualSpend,perHousehold

AnnualIncrementalSpendonGasPrices

%ofDisposableIncome

%ofDiscretionaryIncome

15%

3,042

397

0.4%

0.9%

3,853

503

-0.5%

0.9%

3,039

396

-0.6%

1.3%

1,451

189

-1.1%

-3.2%

2,336

305

-0.7%

2.8%

4,522

590

-0.3%

0.4%

%PotentialHeadwindTo'DiscretionarySpend'-1.2%-1.6%-1.7%-1.5%-1.3%-0.8%

Exhibit3:ImpactofGasonHousehold"IncomeStatement"

All

consumer

units

Lowest

20

percent

Second

20

percent

Third

20

percent

Fourth

20

percent

Highest

20

percent

SummaryHousehold"IncomeStatement"byIncomeCohort

FederalReserve;USBureauofLaborStatistics

Whatarehouseholdsspendingongasatthepump?

MoRGANSTANLEyREsEARcH5

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Asofour2024CEbaseline,annualhouseholdspendingongasolinewasapproximately$2,650.Thisnumberwascloserto$1,300forthelowestincomehouseholds,butroughlytripleforhighestincomehouseholdsat$3,900givenfueltypeconsumptionandnumberofvehiclesperhousehold.Onaverage,thisrepresentsabout3%ofhouseholdexpenditures(higherforlowerincomehouseholds,lowerforhigherincomehouseholds).

Exhibit4:HigherIncomeCohortsSpendmoreonGas

Source:MorganStanleyEconomicsResearch,BLS,HaverAnalytics

Exhibit5:Low-incomeconsumersarelesslikelytoownorleaseavehicle

Source:MorganStanleyEconomicsResearch,BLS,HaverAnalytics

Howhavegaspricesbeenimpactedbytherecentconflict?

Theaveragepriceatthepumpin2024was$3.31,and$3.10in2025,reflectingaveryslighttailwindtotheUSconsumer.In2026,gas

priceshaverisentonearly$3.60/gallon(Exhibit6),up~25%fromthestartoftheyearlowsandup~15%fromtheaveragein2025.MostofthisincreasehasoccurredsuddenlyinMarchduetorecentconflictsinIran(Exhibit7).Brentcrudeprices,however,areupover35%fromtheiryear-to-datelows,andwhilehighlycorrelated,theretendstobealagbetweencrudepricesandpricesatthepump(3-4weeksonaveragebutcanvary).

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Exhibit6:CrudeOil&USAverageGasPricesSpikedinMarch

USAvgGasPrice(LHS)WTICrudePrice(RHS)

4.5

4.0

3.5

3.0

90

85

80

75

70

65

60

55

50

Source:Bloomberg

IDEA

Exhibit7:WhileCrudehasbeentrendinghigher丿andMarchsawamaterialincreaseinUSAvgGasPrices

8%

3%1%

-2%

-5%-4%

-8%-7%

11%

10%

3%2%

USAvgGasPrice,Monthly%ChangeYoY

18%

20%

15%

10%

5%

0%

-5%

-10%

-15%

-4%

-10%

WTICrudePrice,Monthly%ChangeYoY

-2%

-7%

2%1%1%

-10%-12%

-2%

-5%

0%

-3%

17%

-4%

-4%

Source:Bloomberg

RisingGasPriceImplications

Withgaspricesup+25%sincethestartoftheyearto$3.60/gallon,consumptionimpactswilldependonthepersistenceofhigherprices&theincomecohortinquestion.

OurUSstrategyteamhasoutlinedseveralscenariosforthedirectionofpolicy,notingthatwhiletheydon'tmaintainabasecaseon

durationofconflict,theadministrationhassaidthatthecampaignshouldbemeasuredinweeksratherthanmonths.Ourenergyteamhasrecentlyraisednear-termoilpriceforecastsshowinganelevatedbutgraduallydecreasingdirectionoftravelforcrudepricesthisyear.

Oureconomistsnotethatinthecaseoftransitoryoilshocks,theeffectonrealconsumerspendingisnegligible,butincaseofapersistentshocktooilprices,thecumulativeeffectonrealspendingislarger,andoccurswithlags.Thetransmissionchannelisthroughgoods,withthecumulativedeclineinrealgoodsspendingofapproximately90bps12monthsaftertheinitialshock.

Exhibit8:Atransitory10%shockhasnegligibleeffectsonrealspending

Source:MorganStanleyEconomicsResearch

Exhibit9:Apersistentshockhaslarger丿morelaggedeffectsonrealspending

Source:MorganStanleyEconomicsResearch

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APPENDIX:HouseholdCE–SettingtheSpendingStage

WeusethehouseholdconsumerexpendituressurveyfromUSBureauofLaborStatisticsasabaselinefortestingthepotential

implicationsofhighergasprices.Welookatthesurveyacrossincomequintiles.Keyhighlightsonthedemographicsandbreakdownofhouseholdexpendituresinclude:

•Thetop20%ofhouseholdsrepresentnearly40%ofconsumerexpenditures,andanevenhigherpercentofdiscretionaryspending(47%)

•Thelowest20%ofhouseholdsrepresentlessthan10%oftotalhouseholdexpenditures

•Householdsinthelowestincomecohortsallocateamajorityoftheirspendtowardessentials(70%)vs.higherincomecohortswherespendonessentialsvs.discretionaryismorebalanced(51%)

•Sheltercommandsthehighestshareofwalletacrossincomecohorts,rangingfrom18%to25%ofhouseholdspend.

Exhibit10:Lower-incomehouseholdsspendahighershareofwalletonessentialspending

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

%ofTotalExpenditures

34%

66%

Lowest

20

percent

36%

64%

Second

20

percent

40%

60%

Third

20

percent

44%

56%

Fourth

20

percent

50%

50%

Highest

20

percent

DiscretionarySpend,%ofTotalEssentialsSpend,%ofTotal

Source:BureauofLaborStatistics,MorganStanleyResearch

%ofTotalExpenditures

45.0%

40.0%

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

Exhibit11:Thetop20%ofHHsrepresent40%ofCE,whilethebottom20%represent<10%

38.5%

8.9%

Lowest

Highest

20

percent

20

percent

Source:BureauofLaborStatistics,MorganStanleyResearch

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Exhibit12:

Sheltercommandsthehighestshareofwalletacrossincomecohorts

S

Housekeepingsupplies,1%

Tobaccoproductsand

smokingsupplies,0%

Reading,0%

Shelter,21%

FoodatHome,8%

Utilities,fuels,andpublicservices,6%

Gasoline,otherfuels,andmotoroil,3%

Personalcareproductsand

services,1%Miscellaneous,2%

Education,2%Householdoperations,2%

Apparelandservices,3%

Householdfurnishingsandequipment,3%

Entertainment,5%

Foodawayfromhome,5%

Personalinsuranceandpensions,12%

Healthcare,8%

Transportationex.Gas,14%

ource:BureauofLaborStatistics丿MorganStanleyResearch

Below,weprovideasummaryofhouseholdincomestatementsbyincomecohort.Weobservethat:

•High-incomehouseholds(top40%)haveamplecushionintheirincomestowithstandshocks(whetherinflation,gas,studentloans,etc.)withoutimpactingotherareasofspend

•Middle-incomehouseholdsareroughlybreakingevenonincomeafterexpenditures(i.e.,littlecushiontowithstandshocksandverylittlesavings)

•Lower-incomehouseholds(bottom40%)arespendingmorethantheirreportedincome,suggesting:i1)anunknown/undisclosedamountofcashwages;2)consistentuseofcredit/debt;and/or3)useofsavingsonhand(mostrelevantforolderhouseholds/retirees)

MoRGANSTANLEyREsEARcH9

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Exhibit13:SummaryHouseholdIncomeStatement-fromthe2024CE

All

consumer

units

Lowest

20

percent

Second

20

percent

Third

20

percent

Fourth

20

percent

Highest

20

percent

Numberofconsumerunits(inthousands)a/

135,760

27,139

27,186

26,959

27,205

27,272

Ageofreferenceperson

52

57

56

50

49

49

HaveaCollegeEducation(%ofTotal)

70

52.0

60.0

71.0

78.0

89.0

TotalHouseholdExpenditures

$10,661,911,600

$951,113,394

$1,360,768,044

$1,803,557,100

$2,447,688,260

$4,100,127,024

IncomeCohort%ofTotal

8.9%

12.8%

16.9%

23.0%

38.5%

EssentialsSpend,%ofQuintile

60%

66%

64%

60%

56%

50%

DiscretionarySpend,%ofQuintile

40%

34%

36%

40%

44%

50%

Incomebeforetaxes,reported

$104,207

$16,658

$42,925

$74,474

$121,548

$264,510

Incomeaftertaxes(DisposableIncome),estimated

$89,942

$17,272

$42,788

$69,809

$108,887

$211,036

Averageannualexpenditures

78,535

35,046

50,054

66,900

89,972

150,342

Net

11,407

(17,774)

(7,266)

2,909

18,915

60,694

EssentialsSpend

46,792

23,224

32,041

40,166

50,275

75,580

DiscretionarySpend

31,743

11,822

18,013

26,734

39,697

74,762

TotalAverageExpenditures,perHousehold

78,535

35,046

50,054

66,900

89,972

150,342

EssentialsSpend

6,013,127,091

630,276,136

871,066,626

1,082,835,194

1,367,731,375

2,061,217,760

DiscretionarySpend

4,650,126,731

320,837,258

489,701,418

720,721,906

1,079,956,885

2,038,909,264

TotalAverageExpenditures,inAggregate

10,663,253,822

951,113,394

1,360,768,044

1,803,557,100

2,447,688,260

4,100,127,024

EssentialsSpend

100%

10.5%

14.5%

18.0%

22.7%

34.3%

DiscretionarySpend

100%

6.9%

10.5%

15.5%

23.2%

43.8%

TotalAverageExpenditures,%ofTotal

100%

8.9%

12.8%

16.9%

23.0%

38.5%

"Essential"Spend

Shelter

16,317

8,201

10,619

12,895

15,359

25,466

FoodatHome

6,224

3,624

4,310

5,525

6,529

8,523

Utilities,fuels,andpublicservices

4,736

2,849

3,856

4,413

5,188

6,442

Gasoline,otherfuels,andmotoroil

2,645

1,262

2,031

2,643

3,350

3,932

Transportationex.Gas

10,673

3,843

6,399

9,014

12,602

21,446

Healthcare

6,197

3,445

4,826

5,676

7,247

9,771

DiscretionaryIncome

43,150

(5,952)

10,747

29,643

58,612

135,456

"Discretionary"Spend:

Personalinsuranceandpensions

9,797

711

2,712

6,248

11,934

27,279

Foodawayfromhome

3,945

1,655

2,448

3,277

4,682

7,652

Entertainment

3,609

1,316

2,156

2,764

4,133

7,660

Householdfurnishingsandequipment

2,414

1,086

1,399

1,893

3,015

4,668

Apparelandservices

2,001

1,124

1,328

1,642

2,034

3,872

Householdoperations

1,921

851

1,128

1,511

2,009

4,093

Education

1,569

828

407

749

1,353

4,492

Miscellaneous

1,218

619

767

1,173

1,458

2,072

Personalcareproductsandservices

978

427

659

852

1,145

1,802

Housekeepingsupplies

877

513

681

798

1,067

1,327

Tobaccoproductsandsmokingsupplies

352

340

359

437

360

267

Reading

125

47

75

82

122

300

Other

2,937

2,305

3,894

5,308

6,385

9,278

Source:BureauofLaborStatistics,MorganStanleyResearch

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.

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CoverageUniverse

InvestmentBankingClients(IBC)

OtherMaterialInvestmentServices

Clients(MISC)

StockRating

Count

%ofTotal

Count

%ofTotalIBC

%ofRating

Count

%ofTotalOther

Category

Category

MISC

Overweight/Buy

1528

41%

444

49%

29%

690

42%

Equal-weight/Hold

1590

43%

374

41%

24%

725

44%

Not-Rated/Hold

4

0%

1

0%

25%

1

0%

Underweight/Sell

588

16%

87

10%

15%

220

13%

Total

3,710

906

1636

DataincludecommonstockandADRscurrentlyassignedratings.InvestmentBankingClientsarecompaniesfromwhomMorganStanleyreceivedinvestmentbankingcompensationinthelast12months.Duetoroundingoffofdecimals,thepercentagesprovidedinthe"%oftotal"columnmaynotadduptoexactly100percent.

AnalystStockRatings

Overweight(O).Thestock'stotalreturnisexpectedtoexceedtheaveragetotalreturnoftheanalyst'sindustry(orindustryteam's)coverageuniverse,onarisk-adjustedbasis,overthenext12-18months.

Equal-weight(E).Thestock'stotalreturnisexpectedtobeinlinewiththeaveragetotalreturnoftheanalyst'sindustry(orindustryteam's)coverageuniverse,onarisk-adjustedbasis,over

MoRGANSTANLEyREsEARcH11

Morganstanley

RESEARCH

IDEA

thenext12-18months.

Not-Rated(NR).Currentlytheanalystdoesnothaveadequateconvictionaboutthestock'stotalreturnrelativetotheaveragetotalreturnoftheanalyst'sindustry(orindustryteam's)coverageuniverse,onarisk-adjustedbasis,overthenext12-18months.

Underweight(U).Thestock'stotalreturnisexpectedtobebelowtheaveragetotalreturnoftheanalyst'sindustry(orindustryteam's)coverageuniverse,onarisk-adjustedbasis,overthenext12-18months.

Unlessotherwisespecified,thetimeframeforpricetargetsincludedinMorganStanleyResearchis12to18months.

AnalystIndustryViews

Attractive(A):Theanalystexpectstheperformanceofhisorherindustrycoverageuniverseoverthenext12-18monthstobeattractivevs.therelevantbroadmarketbenchmark,asindicatedbelow.

In-Line(I):Theanalystexpectstheperformanceofhisorherindustrycoverageuniverseoverthenext12-18monthstobeinlinewiththerelevantbroadmarketbenchmark,asindicatedbelow.

Cautious(C):Theanalystviewstheperformanceofhisorherindustrycoverageuniverseoverthenext12-18monthswithcautionvs.therelevantbroadmarketbenchmark,asindicatedbelow.Benchmarksforeachregionareasfollows:NorthAmerica-S&P500;LatinAmerica-relevantMSCIcountryindexorMSCILatinAmericaIndex;Europe-MSCIEurope;Japan-TOPIX;Asia-relevantMSCIcountryindexorMSCIsub-regionalindexorMSCIACAsiaPacificexJapanIndex.

ImportantDisclosuresforMorganStanleySmithBarneyLLCCustomers

ImportantdisclosuresregardinganymaterialconflictofinterestthatcanreasonablybeexpectedtohaveinfluencedMorganStanleySmithBarneyLLC'schoiceofathird-partyresearchproviderorthesubjectcompanyofathird-partyresearchreport,

areavailableontheMorganStanleyWe