Maybe things really are getting worse?

Random Walk doesn't think so, but here's some data on why that could be wrong

• OK, so at least some consumer credit took a turn for the worse

• I still don’t think it’s getting bad, but some shoppers say differently

• Restaurants and make up not feeling the love

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Maybe things really are getting worse?

Apropos of yesterday, wherein Random Walk boldly declared “the Almighty Consumer is no worse or better off than it’s been in a year,” a brief update.

Ally Financial, the autolender and insurance broker extraordinaire, says “not so fast, Random Walk.”

credit challenges have intensified over the current quarter . . . [d]elinquencies in the company's retail auto business rose about a cumulative 20 basis points in July and August compared with Ally's expectations, Chief Financial Officer Russell Hutchinson told investors at a financial conference in New York.

"Our borrower is struggling with high inflation and cost of living, and now more recently, a weakening employment picture," Hutchinson said.

Net charge-offs - or debts that are unlikely to be recovered - in Ally's retail auto business were up about 10 basis points in the same period compared to its expectations.

Reuters

Well, July delinquencies weren’t so bad for the other issuers, but for Ally they were—and August too (which we haven’t otherwise seen).

Perhaps all that new consumer credit is desperation, after all?

It’s not necessarily an efficient market, but let it not be said that investors sit idle when negative information makes the rounds:

$Ally Financial takes a dive on some credit quality concerns

Ally took a ~20% header because it made some unexpectedly bad loans.

Crybabies.

Anyways, so maybe things are deteriorating more than I give them credit for.

I still do not think so, but I offer the evidence as I see it. Somewhat relatedly, Goldman says “oopsie” on some of its consumer credit products, as well.

There were a few other tidbits that didn’t make the cut that generally sound in “actually it’s getting worse.” I didn’t include them because they’re a bit “random,” and only really make the point in the mosaic style of knowing things, but since I’m on the subject, I might as well.

So much for lipstick effects

The first comes from the beauty brand Ulta ULTA 0.00%↑, which disappointed the street last week, despite having the lipstick effect (and Warren Buffet) at its back.

Random Walk also has a fondness for Ulta—it sits at the crosshairs of Hey Small Spender + the Donut Effect—and almost wrote a post about how Buffet steals all my best ideas (like the homebuilder trade), but fortunately I got cold feet, and I spared myself the indignity.

Anyways, the company chalked up the earnings miss to, you guessed it, the cautious consumer:

“Consumer behavior is starting to shift as consumers increasingly focus on value, and become more cautious with their spending,” Ulta’s Chief Executive Officer Dave Kimbell said on a conference call. “Our market share continues to be challenged” particularly for prestige makeup and hair care items, he said.

Consumers focused on value, so they skimped on make up.

At the time, I sort of dismissed it as more of the same…blame the consumer, for what is, in fact, just more competition, etc., but . . . could be, maybe, it’s more than that?

The pullback from higher income customers especially was actually pretty dramatic: