- With many up-coming holidays such as Halloween, Thanksgiving and Christmas around the corner, some of the country’s largest chain stores have reported robust back-to-school sales in recent days.
- Consumer prices moderated year-on-year to 8.5% in July, while retail sales held steady despite weak consumer sentiment.
Shopping is as American as hamburgers but soaring prices are prompting those earning less than US$100,000 a year to cut back, even as wealthier consumers appear to be taking inflation in their stride.
Among the most affected are clothing retailers, with shares of upmarket department store Nordstrom falling over 13% on Tuesday after it said it had seen “significantly” lower demand from its lowest-income customers since June.
However, with many up-coming holidays such as Halloween, Thanksgiving and Christmas around the corner, some of the country’s largest chain stores have reported robust back-to-school sales in recent days.
Whether or not that trend to shop will be durable and translate into profits though is less clear.
U.S. retailers are gearing up for a more price-sensitive customer ahead of the critical holiday shopping season and optimism has been tempered by the recognition that low-income consumers are struggling with higher food and gas prices and cutting back on discretionary items.
Walmart (+0.72%), the largest U.S. retailer, is responding by offering entire Thanksgiving meals that cost less than US$50 for a family of four while expecting inflation to continue to influence the choices that families make.
Meanwhile, Macy’s, a higher-end department store group, also said that a “competitive promotional climate” was intensifying as discretionary spending weakened.
Foot Locker (-0.71%), which last week predicted a 3.2% to 3.3% hit to its full-year margins as a result of having to sell its sneakers at a lower price point, added that the promotional environment had become more intense, especially in apparel.
In recent weeks, retailers have been encouraged by signs of slight relief for the U.S. consumer.
Consumer prices moderated year-on-year to 8.5% in July, while retail sales held steady despite weak consumer sentiment.
Most of the moderation in headline inflation in July can be pinned down to a drop in the price of gasoline, which went from a high of US$5 a gallon in June, to just over US$4 in July, even as the prices of other goods crept up.
Markets have been on edge this past week as a conclave of central bankers are due to meet at Jackson Hole, Wyoming and bets are increasing that the U.S. Federal Reserve will reiterate its position on cracking down on inflation with super-sized rate hikes.
