What Walmart, Target, Home Depot and Lowe’s tell us about the economy
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An amalgamation of Target stores, Walmart stores, Lowe’s, Home Depot and Lowe’s.
Reuters
Is the American consumer able to withstand sky-high inflation? It all depends on who you ask.
Four major retailers — Walmart, Target, Home Depot Lowe’s — reported quarterly financial results this week, and they each offered a different perspective on where and how people are spending their money.
Walmart claimed that customers with more stringent pricing preferences are now starting to shop for private-label brands. Home Depot, on the other hand, stressed its resilience among its customers, which include professional contractors and home builders.
They came in the following days AmazonIn late April flashed warning signs for the retail industryWhen it posted the slowest quarterly revenue growth since 2001, and provided a dim outlook.
Target and Walmart still had higher Wall Street expectations this week. Investors and analysts didn’t expect that big-box retailers Walmart and Target would suffer such severe losses in their latest periods. Supply chain costs and unneeded inventory, like TVs, caused a drop in sales. Walmart’s Tuesday closing was down 11.4%. This is the worst day for Walmart since October 1987. Walmart lost another 6.4% in afternoon trading on Wednesday. Target, however, was still at its lowest point since October 1987. its worst day in 35 years.
However, Home Depot and Lowe’s have been gaining more support from shoppers over the past weeks.
Our customers are resilient. Home Depot CEO Ted Decker stated Tuesday that the company is not experiencing the level of inflation sensitivity that we had initially anticipated. Decker spoke on Tuesday at the earnings call. The shares of the two home improvement chain chains fell more than 5 percent in trading on Wednesday afternoon. a broader market selloff.)
Retailers are expressing mixed opinions due in part because Americans have different levels of economic volatility, depending on income. After months of Covid lockdowns that resulted in purchases of toilet paper, canned goods and other products, both consumers and companies are now experiencing a transition. PelotonThe sky is the limit for bicycles. Spending on electronics and sneakers has been fueled by multiple rounds of stimulus funds.
Retailers must adapt to a new reality as the money runs out. Inflation is one example. at 40-year highsRussia’s conflict in Ukraine and an unresolved global supply chain.
On Tuesday, Doug McMillon, Walmart’s Chief Executive Officer, stated that while we have seen high inflation levels in international markets, U.S. inflation is so high and moving quickly in general merchandise and food.
One retailer could be in trouble if the results of this week are any indication. Macy’s, Kohl’s, Nordstrom GapThe following companies have not yet reported results for the first quarter 2022. This is a company that relies on shoppers coming to their shops to purchase new shoes or clothes. Walmart indicated that customers were starting to reduce discretionary spending to spend more money on groceries.
Retailers are also pointing to an increase in the demand for luggage, makeup, and dresses as Americans make plans to travel and get married. However, there is concern that these items will become more expensive and consumers may have to compromise in order to get them. They’ll look for bargains at stores such as TJ Maxx.
Let’s take a look at what Walmart, Target and Lowe’s have to say about America’s consumer market.
Walmart
Walmart’s perception of the future is mixed. This can be attributed to consumers’ income and outlook. The nation’s biggest retailer stated that shoppers have shown that they care about their budget in the latest quarter.
Many customers left stores with less merchandise and walked away from retailers’ websites. As they witnessed rising prices for gas and grocery, more customers opted to skip new clothes and general merchandise. CNBC spoke to Brett Biggs, chief financial officer, about how some traded down to less-expensive brands and smaller products, such as half gallons of milk, or the brand name of lunch meat at a store instead of one of higher quality.
He said that some customers are enticed to buy new furniture for their patios or chase the latest gaming console.
Biggs stated, “If we look at demographics in the U.S.A and put our customer map over it, then we would be very close to the exact same thing.” Biggs said, “And so there are some people who feel more pressure then others. I believe that’s what you’re seeing.”
Target
Target claimed that they are seeing resilient consumers who will have new priorities when the pandemic becomes less urgent.
Brian Cornell, the Chief Executive Officer and CEO of CNBC stated that they are shifting away from buying televisions to purchasing luggage in an interview with “SquawkBox” on CNBC. Later, Cornell said, “They’re still shopping but they began to spend dollars differently.”
According to him, this change manifested itself in fiscal quarter one. Customer bought decorations and presents for Mother’s Day and Easter celebrations. They threw, and attended, larger children’s birthday parties – leading to a jump in toy sales. As they grew older, they also purchased fewer small appliances and bicycles. booked flights and planned trips.
Cornell pointed out Target’s record-breaking spending during the quarter that ended in January, as Americans received stimulus funds and were able to spend more of it.
He said that sales were still up despite this difficult comparison. Target’s online traffic and stores saw nearly 4 percent growth year-over-year. However, sales growth would also include inflation, which makes everything, from groceries to freight, more expensive.
Target had an even higher rate of markdowns last quarter. It was another staple in the retail industry, which disappeared after the pandemic.
Home Depot
On Tuesday, the retailer of home improvements told investors that they are not seeing any changes in consumer behavior.
The inflation fueled by Home Depot’s 11.4% increase in its average ticket, was a major factor behind the company’s rise in sales. Executives also stated that customers are not down trading but trading up. Jeff Kinnaird (Vice President of Merchandising at Home Depot) stated that consumers have switched from lawnmowers powered by gas to higher-end battery-powered ones.
This is likely due to the large majority of Home Depot customers being homeowners who know their home well. home equity values soarIn the past two years. Richard McPhail (CFO) stated on the conference call that nearly 90% of customers who do it themselves own their houses, and almost all sales of contractors to homeowners are for homeowner accounts.
McPhail said also that approximately 93% customers with mortgages have fixed rate rates. As interest rates and housing prices riseMany consumers are choosing to remodel their homes rather than move.
Lowe’s
Lowe’s voiced similar sentiments on its Wednesday conference call. Marvin Ellison CEO stated home price appreciation, aging homes stock and the ongoing housing shortageLowe’s key economic drivers are.
Analysts were told by he that home improvements are unique and could have a macro environment in which there are many questions about consumer health.
Lowe’s customers who are involved in DIY projects make up about 35% of its sales. This is higher than the Home Depot competitor. The company has not yet seen any material trade from these consumers.
Rising energy prices are beginning to pinch consumers. Ellison said that Lowe customers have switched to batteries-powered lawnmowers, landscaping tools, and laundry machines.
It could be fuel price. His answer?
Lowe’s did fall short of Wall Street’s expectations for its quarterly salesHowever, executives attributed the disappointing performance of the retailer to bad weather.
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