We are in the thick of a busy week for retail earnings, heavyweights from Home Depot and Target to Walmart disclosing how US consumers are spending their money.
But behind the headline numbers, real-time transaction data shows a divide across income groups as well as generations, and sticky inflation, gas prices, as well as shifting discretionary habits are reshaping the landscape.
Well here.
Break down the hard data and what it says about consumer health is Michael Gunther, head of insights at Consumer Edge.
Michael, great to have you here.
Thank you so much for joining me.
Thank you for having me.
Well, we got Walmart out this morning and it's been a busy week for retail earnings.
So based on credit card transaction data as well as the latest earnings, what is it telling you about the American consumer?
Yeah, so the American consumer is still spending, but they're becoming more selective, and this is even among high income consumers.
So in all the different sub-industries that we track, some of the outperformers for months have been dollar stores, resale, off price, although.
That's faded a little bit as you saw with TJ's results yesterday and then some of the underperformers have been in home-related categories as the housing market remains frozen and you've seen those comments confirmed by Home Depot and Lowe's.
We have seen pockets of strength in home categories.
Places that are more geared toward repair and maintenance within home furnishings, the companies that may be less dependent on furnishing an entire home, so you saw Wayfair outperform that's gained market share for several consecutive quarters.
You saw within TJ Maxx HomeGoods outperform.
These are not companies that are as reliant on.
Furnishing the entire home, so to sort of fill in categories that seem to be doing well.
Yes, and Michael, I do want to zoom in on the big box retailers, especially as we're watching shares of Walmart down by about 8% in New York morning trade on the heels of their latest earnings reports.
So what do you make of the big box retailers from Walmart to Target?
Yes, so Target's results, uh, you know, were, were reasonable yesterday.
We interestingly saw some momentum into July among a cool demographic cut we have which is households with children.
That's a good proxy for back to school spend, and we saw a big acceleration from June to July in the households with children relative to households without children, which could be an indication that the new assortments and the efforts they're putting into back to school are resonating.
On Walmart's side, one thing we've been tracking a lot recently is how much they are gaining among high income consumers.
This is something we've been flagging since last year, where they were gaining an outside share of their new customer base from high income consumers.
They were offering assortments that appealed to them.
But it also could be an indication that high income consumers are looking for value even though they're holding up better than lower income consumers.
Those share gains have moderated, but they still are much more robust than Walmart share gains among middle and lower income consumers.
Today they indicated they're going to lower prices as a result of the tariff refunds, so we'll be watching the data to see if they can regain momentum among those middle and lower income consumers as well.
Yes, and Michael, you just mentioned the word tariffs.
That is something we're all monitoring.
And before we went on air, we're also talking about what's happening in Treasury yields this morning.
Especially on the heels of yesterday's US Treasury intervention, but at the same time, when it comes to American consumers, whether we're talking about pain at the pump or rates where they are right now, consumers have a lot to contend with.
So what's actually happening when it comes to TJX?
And of course we're awaiting Ros stores.
So what's the reality on the ground?
Ross stores was a really big outperformer last quarter in our data, you know, even more than TJX.
We've seen, you know, sales growth still remain positive.
It's still a big outperforming subindustry, but it's come down a little bit.
That could indicate that it was benefiting from a tax refund boost earlier this year.
But look, I mean, consumers are contending with higher gas prices.
You're seeing this show up in more discretionary areas.
Footwear and athletic apparel has been an area that's been relatively weak.
Within apparel and accessories, that seems to be one of the more discretionary areas where maybe you're deferring the new cool sneaker purchase or something.
Along those lines, JD Sports, the parent to finish line in the US, reported this morning they're commenting on a cautious consumer that brand in our data is very overindexed to the lower income consumer, so it could indicate that that sector may be feeling an outsized brunt from cost pressures.
Yeah, and speaking of cost pressures, I do want to get your perspective when it comes to dining out for Americans because we all know when we shop on a weekly basis at the grocery store, prices are up.
But if we go to restaurants, of course we do have to keep in mind that there's tipping to be added when we dine out.
But what are American diners doing?
So it's interesting because it's not only been about price, uh, because you've seen, you know, places like Chipotle and Cava outperform those aren't necessarily, you know, places that you associated with, you know, the cheapest bill relative to other chains.
It's a clear communication of value.
They've taken share in terms of larger group orders from places like pizza chains because there's more customizable.
Bowls, you know, more awareness of health as people eat out have benefited those chains.
On the flip side, what's really done very, very well are coffee chains, and this has been the strongest sector within restaurants that we track for a long time now over the last year, and we liken this to what was known as the lipstick effect.
This isn't a recession, but if people are feeling a little constrained and they're looking to make sure that their dollar stretches further, maybe they're cutting back in some places, but they're still paying for the 7 to $8 coffee.
So that's been a bright spot in restaurants where maybe people are eating in for their big meals, but they're still treating themselves to those sorts of things.
Yes, Michael, while I have you here and while we're at the New York Stock Exchange, I do want to get your perspective on fast fashion.
And IPOs, especially when it comes to Shine.
So give us your take on what we can expect when it comes to that IPO and what's happening in terms of retention of US consumers.
So when the de minimis exemption was removed in mid-2025, you know, you saw a sharp decline in X and year over year spend growth in the US Um, they recovered a little bit.
They raised price, uh, that was received relatively well, um, but in recent quarters they've lost share even as we're lapping the de minimis exemption.
Going away and what's interesting is if you look at the EU, we have continental European data and the UK in the EU they've contended with other sorts of regulatory actions looking to protect local industry there as well.
Share has come down there in the UK you haven't even seen that.
And while share gains are still stable.
They've moderated quite a bit, so this isn't just a story about these changes in policy.
Sheehan appears to be losing a little bit of steam across the geographies we track overall.
And Michael, finally, before I let you go, we are counting down to Labor Day, which is hard to believe, but as you mentioned, that means back to school and the holiday shopping season is right around the corner.
So when it comes to category winners and losers across retail and restaurant categories, what are you looking at?
Yeah, I mean, we'll be looking at that cut I was mentioning earlier in terms of, you know, children in the household versus versus not, but you know it's going to be about companies communicating clear value, you know, as we've seen consumers are not cutting back completely they are spending when a company comes up with something unique, communicates clear value, um, and then those are the companies that have been outperforming.
It's not necessarily, you know, a.
One way street in terms of how the companies are faring.
Well, Michael, I think value is the key word here when it comes to restaurants and retail, so I appreciate your time and thank you so much for joining us this morning very much.
Thank you.
