and Bed Bath & Beyond-and a potential threat to higher-end consumer goods companies and consumer staple stocks like Procter & Gamble. “Middle and lower-end consumers are starting to get squeezed by inflation, and they are beginning to cut back on nonessential items," Essaye said Wednesday, adding that investors “need to be cautious on the lower end of the consumer spectrum” because “inflation always hits the lower-income cohorts hardest and first, and these results imply that’s starting to happen now.” What To Watch ForĮssaye cautions the Walmart and Target results could be a sign of more negative earnings to come from retailers like Kohl’s Corp. “But I think we have a challenge coming.The SPDR S&P Retail ETF, which counts Walmart and Target as holdings, plunged 8% Wednesday and has tumbled 31.5% this year-far more than the broader S&P 500’s decline of 18%. That means whatever comes to us we buy,” he said. Now he’s waiting anxiously for his customers to have an influx of new customers, so they will build theirs. “These fluctuations are typically good for business,” said Todd Stern, the CEO of XS Merchandise Inc., which specializes in closeout goods, including hardware, housewares and automotive products. But as inflation continues to erode earnings and the threat of a recession grows, retail industry experts say, more consumers with higher household incomes could begin to trade down. He said that according to Placer.ai’s research, about half of all shoppers at TJX, the parent company of Marshalls, TJ Maxx and HomeGoods, as well as Burlington and Ross, have household incomes of $50,000 or less. “They somehow managed to be value-oriented while still having an appeal to higher-income earners.” “The interesting thing about off-price retailers, it doesn’t feel like they have limitations,” said Ethan Chernofsky, the vice president of marketing with the retail-location analytics company Placer.ai. And a recent survey by NPD Group, a global market research firm, found that 83% of U.S consumers plan to spend less on products over the next three to six months. Data released Friday showed consumer sentiment in June dropped to a record low, according to the University of Michigan. Still, the competition for consumers could get fierce, especially if the economy continues to slip. “If persists, then we would expect our assortment to be more compelling with even stronger values.” A shopper leaves a Macy's in Los Angeles. “The buying environment now is better than it has been for years,” he said. And given the deep discounts and the wide array of goods available, brokers and off-price retailers are buying “more of more,” he said, and banking on growing demand for deals as shoppers look to stretch their buying power.īurlington Stores CEO Michael O’Sullivan told analysts last month that the chain has been taking advantage of cheap closeout deals to pad inventories for late summer and fall, when he expects a surge in discount shoppers. Rose said the amount of merchandise on the overstock market is up by around 40% compared to June 2019 levels. ![]() That channel, or pipeline, often leads directly to off-price chains or to distributors like Rose, who resell surplus goods to stores that rely on closeouts, overstocks and out-of-season inventory to stock their shelves. “They would rather take the hit, move it through a channel where it can’t be compared to their full-price items and do the best they can with the new fresh product that’s arriving.” “They don’t want the clearance to cannibalize the full-price sales of those fresh products,” she said. With limited shelf and storage space and shipments of new goods arriving every other week, full-price retailers need to unload poor-selling merchandise quickly, said Lorraine Hutchinson, a retail analyst with Bank of America. Target and Best Buy also marked down more items to move products out of stores and distribution centers. ![]() Short of that, Walmart rolled back prices on more than 10,000 products, including kitchen appliances, sports equipment and home decor. “There’s probably 20% of if you could just wish away and make it disappear, you would,” John Furner, the CEO and president of Walmart U.S., told analysts this month.
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