Last week, major retailers in the U.S. reported earnings. By listening to these earnings calls and reading the reports, we can observe some developing trends among U.S. consumers.
Overall, executives at these companies believe that consumers are starting to tighten their spending and are focusing on essential items such as food and groceries. These companies also noticed a decline in sales of non-essential or discretionary items like home goods, electronics, and apparel. As the low-cost provider, Walmart experienced a boost in sales compared to this time last year. Consumers are seeking more value for their dollars and may not have excess cash at this time.
Walmart surprised on the upside, with sales up 7.2% compared to this time last year. According to Walmart executives, this does not imply that consumers have a surplus of cash. They observed an increase in sales of grocery items and essentials, but sales remained flat for discretionary items like home goods, electronics, and apparel. During tough times, Walmart sees fewer customers purchasing these nonessential items. The preference for grocery items, coupled with a few equity losses, led to a 19% drop in profit for the quarter. Walmart is known for its low costs and attracts consumers looking to save money during difficult times. Walmart raised its profit and sales expectations for the remainder of the year.
Target’s sales remained flat over the last quarter compared to one year ago. Target observed more shoppers spending on groceries but a decline in discretionary items. The net earnings of Target fell by 5.8% to $950 million in the quarter, influenced by higher labor costs, inflation, and shrinkage (the loss of merchandise due to theft or other issues). Lower freight costs have benefited all retailers this year.
Sales at Home Depot were down 4.2% for the most recent quarter, and its annual sales are likely to decline for the first time since 2009. Home Depot experienced a surge in sales and profits as consumers were confined to their homes during the pandemic and invested their time and money in home improvements.
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