In late August, Walmart (WMT) offered investors frightened in regards to the health of the US consumer a lifeline. Its CFO, John David Rainey, told investors Walmart’s customers were being “choiceful,” but when asked about signs of a broader slowdown, Rainey added: “We’re not seeing it.”
Results this week from a slew of massive retail names, nonetheless, make the situation for the US consumer appear far more uncertain.
Retail names starting from Dollar General (DG) and Lululemon (LULU) to Abercrombie & Fitch (ANF) and Ulta Beauty (ULTA) received a mixed response this week after making cautious comments in regards to the overall spending environment and the potential impacts on their business.
Dollar General stock was judged most harshly, falling 32%, essentially the most on record, after the discount retailer cut its full-year outlook, blaming softer sales on a financially strapped core customer.
CEO Todd Vasos highlighted the last week of every of the calendar months within the quarter as “the weakest by far,” with customers leaning into a mixture of the two,000 items still priced at $1 or below.
“All those points would indicate that this can be a cash-strapped consumer, even greater than we saw in Q1,” Vasos told analysts throughout the company’s earnings call on Thursday. Dollar General noted consumers gravitated more toward consumable goods and fewer toward home goods and seasonal items.
The most recent retail sales data showed an increase of 1% in July, above Wall Street’s expectations for 0.4% growth.
But a glance under the hood showed less optimistic signs, in accordance with Forrester Research retail analyst Sucharita Kodali.
“Consumer spending is actually in line and in some categories below the rates of inflation. In order that implies that though the numbers could also be positive, the buyer is admittedly, really softening,” Kodali said in a recent interview with Yahoo Finance.
The info, which is not inflation-adjusted, showed a 0.1% monthly drop in spending at outfitters; department shops saw sales fall 0.2%.
Kodali, like other analysts have pointed to large stores like Costco (COST) and Walmart which have been increasing their market share across quite a lot of classes.
“Lower income consumers are continuing to take out debt, they’re essentially the most stretched they usually are likely driving a few of these Walmart numbers,” said the analyst. “Walmart’s growth I might argue might be coming on the expense of other retailers.”
Nonetheless even brands that focus on a higher-income consumer making discretionary purchases, like Ulta Beauty, pointed to a more money-conscious shopper as a part of the rationale for a miss on the corporate’s top and bottom lines.
“Consumer behavior is beginning to shift as consumers increasingly concentrate on value and develop into more cautious with their spending,” said CEO Dave Kimbell throughout the company earnings call.
Kimbell went on to call out greater competition throughout the high-margin makeup industry as an added challenge to the business.
“Today, there are significantly more places to purchase beauty, especially prestige beauty, with greater than 1,000 recent points of distribution opened within the last three years. Because of this, our market share continues to be challenged, particularly inside prestige beauty,” said Kimbell.
Between consumers being more choosy and increased competition, there’s little room for error for retailers.
Lululemon noted its US women’s business slowed amid an absence of “newness,” or seasonal updates inside styles typically expressed as color, print, and patterns.
“It’s develop into clear to us that this reduced newness, which is below our historical levels and stems from earlier product decisions, has impacted conversion rates given the less recent options available to our female guests,” CEO Calvin McDonald said throughout the company’s earnings call.
“The novelty that we had performed well — we simply didn’t have enough to encourage her to buy.” said McDonald.
Even following a robust quarter at Abercrombie and Fitch, its CEO Fran Horowitz warned of the economic backdrop throughout the company’s earnings call.
“Along with record second quarter sales, that is our seventh consecutive quarter of net sales growth in a dynamic, often uncertain, consumer environment which underlies the strength of our brands,” said Horowitz.
Abercrombie’s stock sold off 14% following the outcomes, though the stock has been certainly one of the S&P 500’s best performers over the past 12 months.
“We predict investors is likely to be just a little bit scared that this could possibly be peak growth for [Abercrombie],” CFRA analyst Zachary Warring told Yahoo Finance.
“It was an incredible quarter. We predict they’re the best-performing apparel brand within the US straight away.”
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
Read the most recent financial and business news from Yahoo Finance