What Walmart, Target, Home Depot and Lowe's tell us about the state of the American consumer

  

Category:  News & Politics

Via:  perrie-halpern  •  one month ago  •  19 comments

By:   NBC News

What Walmart, Target, Home Depot and Lowe's tell us about the state of the American consumer
How well is the American consumer holding up against sky-high inflation? It depends on whom you ask.

S E E D E D   C O N T E N T



The mixed commentary from these retailers is in large part due to the fact that Americans are experiencing economic volatility differently, dependent upon their income levels. Companies and consumers are in an uncharted transition period following months of Covid-related lockdown measures that prompted purchases of canned goods, toilet paper and Peloton Bikes to soar. Multiple rounds of stimulus dollars fueled spending on new sneakers and electronics.

But as that money dries up, retailers must navigate their new normal. That includes inflation at 40-year highs, Russia's war in Ukraine and a still-crippled global supply chain.

"While we've experienced high levels of inflation in our international markets over the years, U.S. inflation being this high and moving so quickly, both in food and general merchandise, is unusual," Walmart Chief Executive Officer Doug McMillon said Tuesday on an earnings conference call.

The results this week could foreshadow trouble for a number of retailers, including Macy's, Kohl's, Nordstrom and Gap, which have yet to report results for the first quarter of 2022. These companies that rely on consumers coming inside their stores to splurge on new clothes or shoes could be particularly pressured, as Walmart hinted that shoppers were beginning to pull back on discretionary items to budget more money toward groceries.

At the same time, retailers are citing an uptick in demand for items such as luggage, dresses and makeup as more Americans plan vacations and attend weddings. But the concern is that consumers will be forced to make trade-offs, somewhere, in order to afford these things. Or they'll seek out discounted goods at shops such as TJ Maxx.

Here's what Walmart, Target, Home Depot and Lowe's are telling us about the state of the American consumer.

Walmart


Walmart is seeing a mixed picture, shaped by consumers' household income and how they feel about the future. But in the most recent quarter, the nation's largest retailer said shoppers are showing they are mindful of the budget.

Customers walked out of stores and left the retailer's website with fewer purchased items. More of them skipped over new clothing and other general merchandise as they saw prices rise on gas and groceries. Some traded down to cheaper brands or smaller items, including half-gallons of milk and the store brand of lunch meat instead of a pricier brand-name one, Chief Financial Officer Brett Biggs told CNBC.

On the other hand, he said, some customers have sprung for new patio furniture or eagerly chased the flashy new gaming console, he said.

"If you look at the demographics of the U.S. and lay our customer map on top of it, we'd be really close to the same thing," Biggs said. "And so you've got some people who are going to feel more pressure than others and I think that's what we're seeing."

Target


Target said it is seeing a resilient consumer who have new priorities as the pandemic becomes more of an afterthought.

"They're shifting from buying TVs to buying luggage," Chief Executive Officer Brian Cornell said in an interview on CNBC's "Squawk Box." He added later, "they're still shopping, but they started to spend dollars differently."

That change showed up with purchases in the fiscal first quarter, he said. Customers bought decor and gifts for Easter and Mother's Day celebrations. They threw, and attended, larger children's birthday parties — leading to a jump in toy sales. They also bought fewer items like bicycles and small kitchen appliances as they booked flights and planned trips.

Cornell pointed to the high spending levels that Target went up against in the year-ago first quarter, as Americans got money from stimulus checks and had fewer places to spend it.

Comparable sales still grew, despite that challenging comparison, he noted. Plus, traffic at Target's store and website traffic rose nearly 4% year over year. Sales growth numbers, however, would include the effects of inflation which is making everything from freight costs to groceries pricier.

Target last quarter also had a higher level of markdowns, a staple of the retail industry that more or less disappeared during the pandemic as shoppers had a big appetite to buy and retailers had less merchandise to put on shelves.

Home Depot


The home improvement retailer told investors on Tuesday that it wasn't seeing any differences in consumer behavior yet.

Home Depot's average ticket climbed 11.4% in the quarter, fueled largely by inflation. But executives also said that consumers are trading up, not trading down. For example, consumers are switching from gas-powered lawn mowers to more expensive battery-powered options, according to Home Depot's Vice President of Merchandising Jeff Kinnaird.

This behavior likely is due to the fact that the overwhelming majority of Home Depot customers are homeowners, who have seen their home equity values soar in the last two years. CFO Richard McPhail said on the call that more than 90% of its do-it-yourself customers own their homes, while basically all of its sales to contractors are on behalf of a homeowner.

McPhail also said that roughly 93% of its customers with mortgages have fixed rates. As interest rates and housing prices rise, consumers who consider moving are opting instead to stay in their current homes and remodel them instead.

Lowe's


Lowe's echoed similar sentiments during its conference call on Wednesday. CEO Marvin Ellison said home price appreciation, the aging home stock and the ongoing housing shortage are key economic drivers of Lowe's business.

"It's one of the reasons why I think home improvement is a unique retail sector and can have this macro environment where there are a lot of questions about the health of the consumer," he told analysts.

Consumers working on DIY projects account for about three quarters of Lowe's sales, which is a higher proportion than rival Home Depot. So far, the company isn't seeing any material trade down from those consumers yet.

However, consumers are starting to feel the pinch from rising energy prices. Ellison told CNBC that Lowe's customers are trading up to battery-powered landscaping tools and lawnmowers and more fuel-efficient laundry machines.

"Do I think it has something to do with fuel prices? The answer is absolutely," he said.

Lowe's did fall short of Wall Street's expectations for its quarterly sales, but executives chalked up the retailer's disappointing performance to weather.


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Just Jim NC TttH
Masters Principal
1  Just Jim NC TttH    one month ago

I was going to buy a new grill this year. Not with the prices they are asking at this point. The industry I work in uses stainless steel in our product so I have a good idea why but damn. Twice what they were last year.

 
 
 
Ronin2
Professor Quiet
1.1  Ronin2  replied to  Just Jim NC TttH @1    one month ago

Same here. I need a new laptop for work/home use; but not at these prices. Guess my 9 year old dinosaur workhorse laptop will have to last for another year or two. Severely cracked casing and all.

 
 
 
Snuffy
Senior Guide
1.2  Snuffy  replied to  Just Jim NC TttH @1    one month ago

I had slowed down or paused a lot of purchases due to prices caused by supply chain issues, shortages, now inflation.  My plans had included buying a new truck last year but that was put on hold due to the crazy prices that new vehicles were going for.  My current car still runs just fine so I will keep driving that.  There's really not much else that I need to buy in the next year or so, so I guess I won't be helping to bail out the economy.  

 
 
 
Ender
Professor Principal
1.3  Ender  replied to  Just Jim NC TttH @1    one month ago

What kind? Last year I decided to go back to charcoal and just bought a cheap one.

 
 
 
Hallux
Sophomore Principal
2  Hallux    one month ago

I'm waiting for my next government handout so I can buy matching socks. ...

 
 
 
Ender
Professor Principal
2.1  Ender  replied to  Hallux @2    one month ago

That is the style, two different ones...

 
 
 
Vic Eldred
Professor Principal
3  Vic Eldred    one month ago

It appears that the entire nation is catching up with the progressive dream state of California which continues to be among the leaders in high taxes, the highest gasoline and electricity prices, high poverty rates, the largest number of welfare recipients, the greatest number of homeless people, the largest number of illegal aliens, the largest number of emigrants with some of the worst schools and roads in the country.  Scranton Joe brought it all to the nation.

 
 
 
magicschoolbusdropout
Freshman Expert
4  magicschoolbusdropout    one month ago

Went to Lowes to buy a simple unfinished 3/4" x 12" x 6' pine board for a simple project yesterday. What used to be a bit under $7.00 is now $18.08. had to get the project done though. Friggin Quart of Stain and a simple paintbrush was over $22.00 .............Gawl !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

 
 
 
RU4Real
Freshman Silent
4.1  RU4Real  replied to  magicschoolbusdropout @4    one month ago

WA-DA-FA?!?!?!?!

 
 
 
magicschoolbusdropout
Freshman Expert
4.1.1  magicschoolbusdropout  replied to  RU4Real @4.1    one month ago

Heck, the 1/4-in x 4-ft x 8-ft Pine Plywood sheet  I'm gonna need in a bit is 42 bucks right now. Thank Goodness I only need one.

 
 
 
Texan1211
Professor Principal
4.2  Texan1211  replied to  magicschoolbusdropout @4    one month ago

You should have waited, after all, we were assured last year that inflation was merely temporary.

 
 
 
magicschoolbusdropout
Freshman Expert
4.2.1  magicschoolbusdropout  replied to  Texan1211 @4.2    one month ago
You should have waited, after all, we were assured last year that inflation was merely temporary.

The Administrations "Temporary" is taking waaaaaaaay tooooooooooooo long a time. 

 
 
 
Texan1211
Professor Principal
4.2.2  Texan1211  replied to  magicschoolbusdropout @4.2.1    one month ago
The Administrations "Temporary" is toooo long a time. 

Come on, man!

Joe is now focused on inflation and has declared it his top domestic priority.

I am positive inflation will be completely gone soon now that he is focused on it, right?

 
 
 
magicschoolbusdropout
Freshman Expert
4.2.3  magicschoolbusdropout  replied to  Texan1211 @4.2.2    one month ago

LOL !

Thank God schifty/schiff and company held that looooong awaited UFO fact finding meeting.

That'll help ....... FOR SURE !

 
 
 
Texan1211
Professor Principal
4.2.4  Texan1211  replied to  magicschoolbusdropout @4.2.3    one month ago

Well, in all fairness, Joe is focused on it, not Congress-critters.

Most of them are still focused on Trump.

And devising ways to limit their huge losses come November.

 
 
 
magicschoolbusdropout
Freshman Expert
4.2.5  magicschoolbusdropout  replied to  Texan1211 @4.2.4    one month ago
Well, in all fairness, Joe is focused on it, not Congress-critters.

256

He sure is !

 
 
 
Texan1211
Professor Principal
4.2.6  Texan1211  replied to  magicschoolbusdropout @4.2.5    one month ago

Dang!

Was he listening to Pelosi or Schumer speak?

Or is he just remembering the last time he sniffed hair?

 
 
 
magicschoolbusdropout
Freshman Expert
4.2.7  magicschoolbusdropout  replied to  Texan1211 @4.2.6    one month ago
Or is he just remembering the last time he sniffed hair?

mmm, mmmm Good !

 
 
 
Ender
Professor Principal
5  Ender    one month ago
McPhail also said that roughly 93% of its customers with mortgages have fixed rates

That is what I did. Whether rates go up or down mine stays the same. There was no way I would have gotten a fluctuating one.

 
 

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