Several major retailers expressed caution about consumers just ahead of the holiday shopping season, the busiest selling period of the year.
Walmart, the largest retailer in the United States, reported that sales rose about 5 percent in its latest quarter, with shoppers spending more on groceries and less on discretionary items like video games. The shift towards essentials suggests that shoppers are restructuring their household budgets due to inflation and rising interest rates.
However, Walmart’s chief financial officer, John David Rainey, expressed caution, stating that consumers began to pull back in late October, even in food and other staples.
Activity picked up again this month, as shoppers took advantage of special promotions, particularly for discretionary items like toys and clothes. However, Target reported a 5 percent decline in sales last quarter, attributing this to a decline in discretionary purchases like electronics.
Overall, consumers are still spending, but other pressures like higher interest rates and increased credit card debt have left them with less discretionary income, forcing them to make trade-offs.
The U.S. Commerce Department reported that retail sales nationwide nudged down 0.1 percent in October, largely driven by weakness in big-ticket categories like furniture and cars, due to higher interest rates.
Home Depot and Macy’s also reported declines in sales in their most recent quarters, attributing it to various factors such as changes in consumer engagement with purchases and higher delinquency rates on credit cards.
Despite the Federal Reserve’s efforts to rein in inflation, consumer demand has remained resilient, and the economy expanded at a 4.9 percent annual rate in the third quarter.
Holiday sales are expected to grow, but by less than in previous years, with retailers like TJX seeing growth in sales and seizing the opportunity in more straitened times.
Ernie Herrman, TJX’s chief executive, stated that customers come to the company’s outlets for more bang for their buck compared to higher-priced retailers.