Is The Consumer OK? What We Know From Retailers About Spending In 2024

As the earnings season unfolds, more businesses are sharing perspectives on consumer trends.

According to a Bloomberg analysis, retailers are frustrated over the lack of spending on the part of shoppers. And yet, retail sales soared by 1% month-over-month in July.

The sharp rebound from stagnation in June surprised economists who expected an uptick of just 0.3%. The data also threw off analysts who expected consumers to pull back on spending due to stubborn inflation.

Turns out, consumers are spending — they’re just picky about where they shop.

For example, spending intentions for leisure and housing are on the rise, according to Deloitte. Sectors like clothing, however, are experiencing low intention levels compared to 2021.

"Consumer spending has been muted this year due to volatile goods spending, with overall spending going up by only 0.3% since year-end 2023," said the report.

The University of Michigan’s monthly consumer sentiment index proclaimed July as the worst month for consumers since November 2023. However, sentiment picked up in August.

What Companies Are Saying

Home Depot Inc (NYSE:HD) felt the sting of homeowners holding off on renovations until interest rates come down. The company’s second-quarter comparable sales decreased 3.3%, with U.S. comparable sales down 3.6%, reflecting weaker consumer demand.

Macy’s Inc (NYSE:M) also saw consumers turning away from more expensive items. Second-quarter sales hovered at around $4.94 billion — down 3.8% year over year.

Macy’s CEO Tony Spring told CNBC that "a softness, a carefulness, a delay in the conversion of purchasing” are to blame.

“Even the affluent consumer is not spending like they were a year ago,” he added.

Macy’s released mixed second-quarter results that missed analyst consensus and forced it to lower its guidance.

Other retailers had better luck.

TJX Companies Inc (NYSE:TJX) shares jumped by over 6% on Wednesday. The company, which owns TJ Maxx, Marshalls, HomeGoods and Sierra, among other brands, posted a 4% increase in store sales.

The jump in sales was driven entirely by a net rise in customer transactions, said the company, which was surprised by the results and raised its guidance for next year. A sales uptick for TJX might mean consumers are choosing to direct their discretionary spending toward discount prices found in stores like TJ Maxx and Marshalls.

An earnings report from Ross Stores Inc (NASDAQ:ROST), scheduled for Thursday, might confirm the trend. Analysts from Zachs expect the company to post revenues of $5.25 billion, representing a year-over-year increase of 6.3%.

Strong quarterly results from Walmart Inc (NYSE:WMT) took shares 9% higher after the company's earnings results were posted Thursday. Sales for the quarter totaled $169.34 billion, up 4.8% year-over-year, beating expectations and pushing the company to raise its guidance. "So far, we aren’t experiencing a weaker consumer overall," said President and CEO C. Douglas McMillon on the call. The retail exec also reported a deflationary trend in its U.S. store prices. Walmart shares rose on Wednesday in response to positive results from

Walmart CFO John David Rainey said: “Everyone is looking for some piece of information that maybe indicates further weakness with our members and our customers, we’re not seeing it.”

Rainey said his company is not immune to the volatility of the day, especially when considering the geopolitical backdrop. “Other economic data out there, as well as the state of affairs globally, would suggest that it’s prudent to remain appropriately cautious,” he said.

Target Corp (NYSE:TGT) sales were up by 2.7% and also beat market expectations. CEO Brian Cornell noted improving trends across discretionary categories, most notably in apparel and beauty products.

Consumers have shown remarkable resilience in the face of multiple challenges over the last several years, and they remain resilient today, he said, adding: "Given the significant headwinds they faced with inflation over the last few years, consumers continue to focus on value as they work hard to manage their household budgets.”

Chief Commercial Officer Rick Gomez said that while economic data remains mixed, American families continue to deal with a lot but are still "willing and able to spend." 

"Yes, they’re still being choiceful. Yes, they’re budget conscious. And yes, they’re hunting for deals and everyday value. But they’re also willing to shop when they find that right combination of fashion and newness at the right price. This was on full display in our second quarter results," said Gomez.

ETFs To Watch

• Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY), an ETF that follows the performance of major companies in industries such as retail, automobiles, consumer durables, apparel, hotels and restaurants, is up by 1.1% on Wednesday and down 1.3% in the last month.
• Vanguard Consumer Discretionary Index Fund ETF (NYSE:VCR) presents a similar performance, up 1.3% on Wednesday and down 0.5% in the last month.

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• Fed Minutes Reveal ‘Plausible Case’ For Interest Rate Cut As Policymakers Cheer Inflation Progress

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