Collection of Target, Walmart, Lowes and Home Depot stores.
How well is American consumer fighting against sky-high inflation? Depends on who you are asking.
Walmart has begun to trade for some private label brands with its price-sensitive customers, while Home Depot emphasizes the flexibility of its customer base, with a significant percentage of professional home builders and contractors.
However, expectations were high on Wall Street this week for both Walmart and Target. Analysts and investors did not expect the two big-box retailers to be so successful in their profits in recent times as supply chain costs have skyrocketed and unnecessary inventory such as televisions and kitchen appliances have accumulated. Walmart closed down 11.4% on Tuesday, marking the worst day since October 1987. On Wednesday, Walmart fell another 6% in afternoon trade, while the target was also up. Worst day in 35 years.
Home Depot and Lowes, however, have seen more strength among shoppers in recent weeks.
“Our customers are flexible. We do not see the level of inflation that we initially expected,” Home Depot CEO Ted Decker said in the company’s revenue call on Tuesday. (Shares of two home improvement chains fell more than 5% in Wednesday afternoon trading) A wide market sale.)
The mixed commentary of these retailers is largely due to the fact that Americans experience economic fluctuations differently depending on their level of income. Companies and consumers are in a period of unspecified transition following the lockdown activities related to Govt. Pelodon Tall bikes. Several rounds of stimulus dollars spurred spending on new sneakers and electronics.
But when that money dries up, retailers have to go back to their new nature. That includes inflation At the peak of 40 yearsRussia’s war in Ukraine and still disabled global supply chain.
Doug McMillan, CEO of Walmart, said on Tuesday, “Although we have been experiencing high inflation in our international markets for many years, it is unusual for US inflation to be so high and for food and commodities to move so quickly.
This week’s results may indicate problems for many retailers Macy’s, Coles, Nordstrom And IntervalResults for the first quarter of 2022 have not yet been announced. These companies, which rely on consumers to come into their stores to buy new clothes or shoes, can be particularly stressed as Walmart shoppers begin to shy away from preferred products. Budget more money for groceries.
At the same time, retailers point out that as more and more Americans plan vacations and attend weddings, demand for items such as luggage, clothing and cosmetics has increased. But the concern is that consumers are forced to make trade transactions, somewhere, to buy these products. Or look for discounted items at stores like theirs DJ Max.
Here is what Walmart, Target, Home Depot and Lowes have to say about the state of the American consumer.
Walmart sees a mixed picture of how consumers feel about their home income and future. But in the most recent quarter, the country’s largest retailer says shoppers are focusing on the budget.
Customers left the store, left the retailer’s website, and bought fewer items. Seeing the rising cost of gas and groceries, many of them skipped new clothing and other general items. Some traded for cheaper brands or smaller items, including a half-gallon milk and lunch butcher shop brand, instead of an expensive brand-name, Chief Financial Officer Brett Pix told CNBC.
On the other hand, he said some customers are eagerly pushing for new patio furniture or a new gaming console.
“If you look at the population of the United States and put our customer map on top of that, we’re very close to the same thing,” Pix said. “So you’d got some people who were going to feel more stressed than others, I think that’s what we’re looking at.”
The goal is to see a flexible consumer with new priorities as the epidemic becomes a afterthought.
“They are switching from buying TVs to buying luggage,” CEO Brian Cornell said in an interview with CNBC’s Squawk Box. He later said, “They’re still shopping, but they started spending dollars differently.”
That change was shown by purchases in the first quarter of the fiscal year, he said. Customers bought decorations and gifts for Easter and Mother’s Day celebrations. They threw and attended big kids’ birthday parties – there was a boom in toy sales. They also bought less items such as bicycles and small kitchen appliances Booked flights and scheduled trips.
Cornell pointed to Target’s high spending levels in the first quarter of the previous year as Americans received money through incentive checks and had fewer places to spend it.
Despite the challenging comparison, comparable sales still grew, he noted. In addition, Target’s store and Internet traffic increased by approximately 4% per year. However, sales growth numbers will include the effects of inflation, which has pushed up prices of everything from inventory costs to groceries.
Target had a large number of markdowns in the last quarter, which more or less disappeared during epidemics because shoppers were more eager to buy and retailers had less inventory to put on the shelves.
The home improvement retailer told investors on Tuesday that it still does not see any difference in consumer behavior.
Home Depot’s average ticket price rose 11.4% quarterly, driven by inflation. But executives said consumers are not trading, they are trading less. For example, according to Jeff Kinnair, vice president of merchandising at Home Depot, consumers are switching from gas-powered lawn mowers to more battery-powered options.
This behavior may be because most of the home depot customers are homeowners. Home equity values will rise In the last two years. At the call of CFO Richard McPhail, more than 90% of its do-it-yourself customers own their homes, while all of its sales to contractors are on behalf of the homeowner.
McPhail also said that about 93% of customers with mortgages have fixed rates. When interest rates and home prices riseConsumers who consider moving, instead stay in their existing homes and choose to remodel them instead.
Lowe echoed similar sentiments during its conference call on Wednesday. According to CEO Marvin Ellison, rising home prices, aging housing stock and The Continuing housing shortages Key economic drivers of Lowe’s business.
“This is one reason why I think home improvement is a unique retail sector, and it may have this macro environment where there are a lot of questions about consumer health,” he told analysts.
Consumers working on DIY projects account for three-quarters of Low’s sales, which is higher than competitor Home Depot. So far, the company has not seen any commodity trade from those consumers.
However, consumers are beginning to feel the pinch from rising energy prices. Ellison told CNBC that Lowe’s customers are trading in battery-powered landscaping tools and even lawns and more fuel-efficient washing machines.
“Do I think fuel prices have anything to do with this? The answer is absolute,” he said.
Lowin Its quarterly sales were lower than Wall Street expectationsBut executives turned the retailer’s disappointing performance into weather.
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