Reuters/Mohammad Khursheed
- Macy's said US consumers have less cash to spend, and are choosing experiences over products.
- Lowe's said homeowners are doing well, but fewer are taking on projects themselves.
- Dick's meanwhile reported an unexpected uptick in inventory shrink from retail theft.
American households continue to dial back spending on non-essential products as their cash reserves dwindle and credit card balances rise.
The shift presents a challenge to retailers that sell discretionary merchandise like apparel and home goods.
Macy's, Dick's Sporting Goods, and Lowe's each sounded alarm bells on Tuesday about the financial state of US shoppers, with each company reporting softening profit margins in key categories.
Even with high prices and rising interest rates, US consumers are certainly still spending lots of money, but they're also getting more selective about where they spend it.
Macy's said its shoppers are under mounting financial pressure and their credit card balances are rising. Many are opting to spend on experiences, rather than products, and they are bracing for the return of student loan payments, Macy's CEO Jeff Gennette told CNBC.
Total company sales for the quarter fell 8% compared to the same period last year, and profits dropped due to markdowns and promotions that helped clear spring inventories.
Lowe's — like rival Home Depot last week — is seeing weaker demand from its DIY shoppers after a burst of home spending during the pandemic. Rising interest rates and falling lumber prices aren't helping.
Even so, both home improvement companies said pro shoppers are helping keep sales steady, and that homeowners are still benefitting from increased home values.
Dick's, meanwhile, reported a 23% quarterly drop profits compared to the same period last year, which it blamed on an unexpected uptick in inventory shrink due to theft.
"The number of incidents and the organized retail crime impact came in significantly higher than we anticipated," Dick's CFO Navdeep Gupta told analysts on the earnings call, warning of elevated levels through the remainder of the year.
In prepared remarks, Dick's CEO Lauren Hobart called shrink "an increasingly serious issue impacting many retailers."
Last week, Target CEO Brian Cornell said Target stores have seen theft incidents with violence or threats of violence more than double in the first half of this year, and that shrink remains on track to cost the company $1.2 billion in 2023, a $500 million increase over last year.
The big winner in this week of earnings remains Walmart, which has benefitted significantly from continued spending on essentials like groceries.
"Customers are stretching their dollars further and seeking better value across more categories, more often," Walmart CFO John David Rainey said in a call with analysts last week.