Disaggregated Sales and Stock Returns

Using transaction-level credit card spending from a large US financial institution, we show that disaggregated sales provide accurate and persistent signals of customer demand relevant to a firm’s stock pricing. After controlling for earnings and sales surprises, one inter-quintile increase in the adjusted customer spending during a firm’s fiscal quarter leads to 1.5 percentage points increase in the 60-day post-earnings-announcement CAR. The predictability concentrates in consumer-oriented firms, especially those relying more on indirect sales distribution channels. We also find a stronger return response to spending from high FICO score, high liquidity, and loyal customers. The transmission speed of disaggregated sales information is slower than that of the earnings information, and small firms or firms far from their end customers exhibit a more delayed price response. Finally, the return implications of adjusted customer spending extend to firms along the production chain.