Trading Desk: Just How Much Gas Prices Are Hurting (And How To Play The Theme)

Forget Walmart (WMT) and Target (TGT) for a minute. Dig into the monthly retail sales numbers and Americans are finding the cash to keep up with inflation . . . we just aren’t spending a lot more on clutter right now.

But what are we buying and how sustainable is this pattern? Start with real dollar amounts, which means that for once, we aren’t going to adjust for seasonal factors here.

Retail activity in July was up 8% from last summer. That’s an extra $55 billion a month moving through American stores and restaurants.

However, in real terms, it’s still $14 billion less than what we all spent back in May. It’s a relatively “cool” summer as far as that goes . . . prices aren’t dropping, but they aren’t climbing so fast either.

Either way, 35% of all extra spending goes to the gas station. Another 20% has gone to Amazon (AMZN) and other online venues. And we’re spending 10% more at the grocery store than we were last summer.

That’s where the inflation is. Americans are spending $670 million a day more at the pump than we did a year ago . . . a burden that falls mainly on people who drive to work, drive at work or both.

Sales at general merchandise and clothing stores are flat at best. Ditto furniture and sporting goods. We’ve evidently got enough “stuff” for the time being.

Restaurants are booming. Buy the right restaurant stock and you’ll do well here. We’ll talk about that later.

Here, however, I want to linger on that gas station. They aren’t pumping more gallons of fuel. They’re just charging more for every gallon . . . and every gallon costs them more in turn.

CrossAmerica Partners (CAPL) distributes some of that gas. It’s a relatively small company compared to the integrated Big Oil giants, but they’re in the sweet spot in terms of margins, capturing almost 3 cents extra per gallon than they did a year ago.

That’s enough to triple the profit and maintain what’s now close to a 10% yield. Not a bad idea to put whatever money you have left after filling the tank into a stock like this.

Otherwise, I’ll be watching Casey’s General Stores (CASY) earnings in a few weeks with great interest. And because Costco (COST) has a loyal following that buys gas at the warehouse stores, it’s probably one of my top retail names right now.