Four major retailers — Walmart, Target, Lowe’s and Home Depot — reported mixed quarterly earnings this week, and they each offered a different perspective on how consumers are spending their money.
Walmart is seeing a mixed picture, shaped by consumers’ household income and how they feel about the future. In the most recent quarter, Walmart said some of it’s more price-sensitive customers are beginning to trade down to private-label brands, and that customers walked out of stores and left the retailer’s website with fewer purchased items. On the other hand, some customers have purchased new patio furniture and new gaming consoles, according to the Chief Financial Officer Brett Biggs for CNBC.
Target said it’s seeing a resilient consumer who has new priorities as the COVID pandemic becomes more of an afterthought. The retailer reported that people bought decor and gifts for Easter and Mother’s Day celebrations, as well as children’s birthday parties — evident by a jump in toy sales. They also reported that consumers traded purchases like small kitchen appliances and bicycles for luggage and other travel essentials.
Home Depot hasn’t reported any major differences in consumer behavior yet. The CEO Ted Decker highlighted the strength they’ve seen among shoppers. In the company’s earning call, he said, “Our customers are resilient. We are not seeing the sensitivity to that level of inflation that we would have initially expected.” The store’s average ticket climbed 11.4% in the quarter, fueled largely by inflation, but executives said that consumers are trading up, not trading down. For example, Home Depot’s Vice President of Merchandising said consumers are switching from gas-powered lawn mowers to more expensive battery-powered options.
Lowe’s echoed similar sentiments to Home Depot during the company’s quarterly earnings call on Wednesday. The CEO, Marvin Ellison, said home price appreciation, the aging home stock and the ongoing housing shortage are key economic drivers of the company’s business. Consumers working on DIY projects accounted for about three quarters of Lowe’s sales, which is a higher proportion than rival Home Depot. So far, the company isn’t reporting any material trade down from those consumers yet.
The mixed commentary from these retailers is in large part due to the mixed experience Americans have in terms of economic volatility. Consumer spending depends on a variety of factors, including individual income levels and priorities.
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