Retailers are trying various strategies to counter the drag from inflation and tariffs, from leaning on wealthier customers and celebrity ads to outright store closures. Headed into the year-end shopping season, they have had mixed success as consumers have turned much more cautious- even as they opened their wallets for the Black Friday shopping season.
Retail chains are seeking to adapt to evolving consumer behaviour – Bloomberg
Among the retailers that reported thus far this week, Dollar Tree raised its annual profit expectations, American Eagle forecast an upbeat holiday quarter, Macy’s hiked annual targets, and Zara owner Inditex surpassed expectations for fourth-quarter sales. Dollar General and Kroger will report quarterly results on Thursday.
“The unexpectedly positive results are likely a function of two key factors: lowered corporate expectations and greater consumer resilience,” said Jeff Derman, a partner in the consumer retail group at financial advisory firm Solomon Partners.
American Eagle’s “Great Jeans” denim campaign with actress Sydney Sweeney was among a flurry of celebrity tie-ups that helped the company boost demand- and bump its stock price, which has gained more than 60% since the beginning of September. Shares of American Eagle rose 15% on Wednesday after the company raised its annual comparable sales forecast after markets closed on Tuesday. The results also show that consumers are loyal to specific brands and looking for bargains, said Jay Woods, chief market strategist at Freedom Capital Markets.
Chesapeake, Virginia-based Dollar Tree drew in more customers from different income groups as it expanded its product assortment. It, too, beat earnings estimates. “The low-end consumer has been joined by the high end looking for bargains and has become more frugal and trading down in their shopping habits,” Woods said.
Meanwhile, department store operator Macy’s, which has been undergoing a months-long turnaround, on Wednesday surprised investors with a profit- but still warned of a “more choiceful” consumer due to inflation pressures. It forecast holiday-quarter profit below expectations, pushing its shares down about 1%. “Consumers are more discerning about how and where they spend their dollars,” Macy’s CEO Tony Spring said on a post-earnings call.
The crucial five-day Thanksgiving holiday shopping event saw a surge in online spending, mainly from more affluent shoppers. But underlying signs of economic fragility signal a pullback in spending could be looming.
During Cyber Week, shoppers at Target and Walmart cut down on impulse purchases, while more consumers than ever tapped short-term debt from buy-now-pay-later providers, Adobe data showed. In Europe, consumer demand has been tepid as shoppers trade down from high-street fashion to cheap online platforms such as Shein.
Inditex, a bellwether for global fast-fashion, beat analysts’ expectations for the start of its fourth quarter, a period that includes the crucial Black Friday weekend. It reported currency-adjusted sales growth of 10.6% for November. Inditex- which also owns Bershka, Massimo Dutti, Oysho, Pull & Bear, and Stradivarius– has been closing smaller stores and opening new, bigger flagships that deliver higher revenues.
“The question will be whether the consumer now backs off more than thought between now and December 25. Have they spent all to be spent on sales, and refrain from regular-priced spending from now to Christmas,” said independent retail analyst Bruce Winder.
