- There is plenty of cause for concern in the US consumer economy right now, but it's not all bad news.
- The days of worry-free spending have been replaced with a sharper eye toward getting a good value.
- As some companies struggle with the shift, others like Walmart, Target, and TJX are poised to do well.
The US consumer economy is in a weird place right now and there is no shortage of reasons to be concerned about it.
From the wild gyrations of the stock market, ongoing conflicts around the world, the depletion of savings accounts, and rising unemployment numbers, it's no wonder many Americans are feeling uneasy.
Those feelings are translating — as they often do — into the ways we're spending money. This is especially true at the polar ends of the wealth scale, with wealthy households anxious about their investment portfolios and low-income families stretched to their limits by rising prices.
But for many of those in the middle, the days of worry-free spending have been replaced with a sharper eye toward getting a good value.
This shift has caused some struggle for companies like Starbucks, PepsiCo, and Whirlpool, who, in recent weeks, reported weak sales numbers that executives largely attributed to a challenging consumer environment.
Still, retailers who have staked their reputation and strategy on delivering a good bang for your buck — such as Walmart, Target, and TJX — are poised to do well when they report earnings in the coming weeks.
That's a bright spot in an otherwise uncertain moment, namely that there are things that companies can do to meet the needs of American shoppers who are in their budget era.
Not only can companies do something to help, but the ones who are helping appear to be doing quite well financially.
"Across a lot of the value retailers here, there's a fair amount of green," said Jefferies retail analyst Corey Tarlowe, referring to a chart showing revenue expectations for companies in the segment on a Monday investor call.
There are a number of reasons to be (cautiously) optimistic.
For starters, Costco's long-held gospel is to keep prices low and satisfaction high for its customers, not unlike the approach Walmart is leaning into as well.
Over the past few quarters, the consumer trends that have been good for one have also worked out for the other, which means that Costco's booming July sales numbers reported last week could be followed by positive quarterly results for Walmart on Thursday.
Tarlowe also highlighted transaction and foot-traffic data that indicate Target's summer discount strategy helped spur visits to the retailer, improving the prospect of strong sales results next week. In other words, Target's Walmartification strategy seems to be paying off.
Meanwhile, foot traffic from Placer.ai shows that off-price retailers like TJX had a strong start to the year, and Jefferies is expecting strong sales growth for the quarter when the company reports next week. Where better to find a deal on apparel than at TJX's T.J. Maxx, Marshall's, or Sierra?
Taken together, it's clear that a lot of Americans are still spending money, they're just getting more careful about finding the best deals.
Just maybe, after all the consternation about price gouging and greedflation, these examples might motivate more companies to find new ways to invest in providing real value for their customers.
It could very well pay off.