Some retailers thrive…: For some businesses (like grocers and certain discount retailers), higher food costs are an opportunity to win a greater share of wallet and boost foot traffic from deal-seeking shoppers.
-
Kroger raised its annual forecast as it benefited from more consumers opting for private label brands and eating in, per its Q2 earnings release.
-
Albertsons also raised its full-year outlook after comp sales grew 6.8% YoY in Q1.
-
Dollar General and Dollar Tree each reported quarterly sales gains in Q2 as shoppers purchased more consumables and other need-based items from discount retailers.
…while others struggle: The pullback on discretionary spending has hurt many non-luxury, non-grocery retailers, with apparel and consumer electronics businesses particularly hard-hit.
-
Rent the Runway lowered its sales outlook and announced plans to cut almost one-quarter of its employees as more consumers canceled or paused their subscriptions, per Reuters.
-
American Eagle’s sales fell 6% YoY in the last quarter as the company resorted to more markdowns to move inventory amid sluggish demand.
-
Weakening demand for consumer electronics caused Best Buy’s sales to drop 12.8% in Q2.
The big takeaway: Despite the doom and gloom surrounding the inflation numbers, there are signs that falling gas prices are causing consumers to feel better about the economy.
-
Consumer confidence grew in August after a three-month decline, while consumers’ assessments of their short-term financial prospects, purchasing plans, and business conditions all improved last month, per The Washington Post.
-
Energy prices fell 5% MoM in August, giving shoppers some breathing room and some extra funds to allocate toward rent and groceries.
- At the same time, consumers’ deal-seeking behaviors will endure well into the holiday season as inflation curbs discretionary spending.