Shoppers make fewer purchases and fewer trips to stores. But when they check at the till, they often spend more, revealing the impact of inflation. Many low-income shoppers are cutting back on non-essential spending like home decor and spending big at discount dollar stores.
These are some of the takeaways from a series of mid-year financial bulletins released by major US retailers, including Walmart, Macy’s and Dollar Tree. They reflect a deep uncertainty that has taken hold of the US economy, with inflation hitting its highest rate in decades.
Department store chains Macy’s and Nordstromas good as Victoria’s Secret this week joined a growing list of retailers cutting their guidance for the rest of the year. Businesses are reporting fewer shopper visits compared to a year ago, although some retailers, including home goods seller Williams-Sonoma Wednesday and Home Depot last weekcontinued to record rising sales despite slowing store traffic.
At Dollar General and Dollar Tree, inflation had the effect of boosting sales, the companies reported Thursday, as shoppers sought cheaper groceries, smaller packaging and more product deals. essential.
Some retailers seeing declining sales blamed their rush to cut and sell off unwanted inventory: an unexpected glut of things like pajamas and kitchen appliances which were hot during the pandemic until suddenly shoppers became more interested in travel and dining out.
People are still shopping
This all comes against the backdrop of a massive, record-breaking shopping spree that marked 2020 and 2021. This year, as pandemic restrictions were lifted, people turned to experiences rather than things. . And then, as gas and food prices increased inflation, more and more shoppers began to turn to private labels or skip discretionary items.
In surveys, people say they feel extremely anxious about finances. However, in July, retail sales, once adjusted for inflation, lined both compared to June and July 2021 as prices have come down somewhat.
“Every measure I see is that the economy is pretty resilient,” Forrester analyst Sucharita Kodali said, pointing to higher wages, low unemployment, decent levels of savings and retail spending staying at the bottom. above pre-pandemic levels. “Retail spending, even despite inflation, is at an all-time high.”
Buyers are “under pressure”
This week, Macy’s, the largest department store chain in the United States, lowered its forecast for the full year. The company said its shoppers are not turning to cheaper brands, as other retailers have seen, but are instead looking for discounts and prioritizing purchases such as office wear as more and more people return to the workplace in person.
The consumer “is actually still healthy, but they’re under pressure. The wage rate isn’t keeping pace with inflation,” CEO Jeff Gennette said. told Bloomberg Tuesday, suggesting high-end shoppers were less affected and luxury goods were selling well.
Kodali points out that many retailers — especially department stores — had been faltering long before the pandemic hit, especially as many malls declined and big brands rushed to sell directly to online shoppers.
Wells Fargo economists warn that back-to-school shopping has been a major factor driving retail spending in recent months.
“Once children return to school and bills come due, households will begin to tighten their belts,” the company wrote. in a report last week. “Even if inflation shows signs of moderating, it will only do so slowly.”
Meanwhile, Walmart – whose large footprint and low prices make it much more of an economic indicator – has flip-flopped from warnings about the rest of the year to signal better times ahead.
In July, the company alerted Wall Street to falling profitsas people’s high grocery bills made products in other aisles less appealing. But last week, Walmart improved its forecastsnoting that its stores were attracting more middle- and upper-income shoppers.
Walmart’s biggest rival, Amazon, for its part said last month he had seen no impact of inflation on demand, as the company’s buyers continued to spend more.