The demise of the American shopper has been overblown. New quarterly earnings reports and other data show that . They’re just doing it a lot more cautiously — and with a preference for big-box retailers.
Inflation , to the point that next month. , driven by the Fed keeping overall rates higher for longer, continue to deter spending on big-ticket . These conditions are affecting brick-and-mortar retailers in different ways across different industry sectors.
A slew of quarterly earnings reports in recent weeks show that the retail market is somewhat polarized, with clear and in a pitched . “Wallets right now are tight,” Greg Zakowicz, a senior e-commerce expert at the marketing platform Omnisend, said in an interview. “Consumers are nervous and spending will continue to be more intentional through the end of the year.
” That cautious spending approach underscores why Walmart CEO Doug McMillion attributes the retail giant’s recent success to its focus on value and convenience. Those priorities have helped , with particular growth among wealthier consumers. It’s partly why McMillion said during the company’s second-quarter earnings call this month that the retailer is across different categories.
“Customers from all income levels are looking for value and we have it,” McMillon said. is a strategy that has also boosted Target . It worked because Target “had the right inventory and the right products,” said Mickey Chadha, a vice president at Moody’s.
In May, Target said it would lower prices for more than , from meat and bread to essentials. As consumers become more , driven in part by , retailers are . They are quickly realizing that “if shoppers don’t need an item or see the value in it, they’re ,” Chadha said.
Walmart’s online and is a cornerstone in the fiercely competitive . Its strong second-quarter performance, consistent with the previous quarter, has largely been driven by a focus on food — which attracts shoppers and increases in-store traffic, Chadha said. The approach has even drawn in higher-income consumers, expanding its customer base.
According to a new , visits to Walmart during the second quarter increased almost 4% year-over-year. Jerry Sheldon, vice president of technology at the market research firm IHL Group, said that because inflation is still hitting middle-class consumers hard, those shoppers are . “The current economic conditions clearly favor Walmart,” Sheldon said, adding that as more consumers continue “living paycheck to paycheck,” Walmart stands to gain an even larger market share.
Costco and BJ’s Wholesale are also thriving by focusing on value. Costco, for instance, saw a 12.2% increase in visits year-over-year during the second quarter, according to Placer.
ai. BJ’s saw a 7.4% increase during the same period.
Shoppers also appear to be lingering around Costco locations longer, with average . That’s despite Costco saying it would implement a . Shoppers remain “value focused in their purchasing behavior,” BJ’s Wholesale CEO Robert W.
Eddy said during the company’s second-quarter earnings call this month. Executives mentioned the word “value” almost 50 times during the company’s call, according to FactSet. Higher-income shoppers are on the hunt for food, apparel, and electronics, Eddy said, but big-ticket items like patios are staying on shelves.
“They’re waiting for a markdown,” Eddy said of shoppers. “They’re waiting for promotion.” By contrast, Macy’s is struggling — and of it.
“The consumer is more discriminating,” Macy’s CEO Antony Spring told investors during the company’s earnings call last week Macy’s has been grappling with and increased . Earlier this year, Macy’s said it would in an effort to cut costs and . Off-price retailers like T.
J. Maxx are capitalizing on the . T.
J. Maxx parent TJX reported a during its most recent quarter, driven by low prices. TJX CEO Ernie L.
Herrman told investors this month that the company is “convinced that consumers will keep seeking value.” As and , the rival home improvement retailers will need to to address the growing competition and changing consumer preferences. Even higher-income consumers, who are more likely to make home improvements, are deferring spending due to higher interest rates — and the expectation of future rate cuts, Christina Boni, Moody’s Ratings’ senior vice president of corporate finance, said in an interview.
“The home category is taking a breather,” Boni said. “Consumers are shifting spending to other areas like services, travel, and entertainment.” Micahel Zakkour, chief strategist at business consulting firm 5 New Digital, said consumers are currently “looking for better experiences, small luxuries, deals on staples and a bit of travel over big ticket items and projects.
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