Americans Are Becoming Bargain Hunters

Estimated reading time: 3 minutes

A Tale of Three Retail Reports

Company earnings can give us a lot of insight into the business cycle and the state of the economy. And in the case of recent results from the retail industry, it can shed light on how Americans are spending their hard-earned cash.

The results were clear: Americans are still spending, but they’re getting more selective.

Bargains Are In

Earlier this week, Macy’s (M), Target (TGT), and discount store conglomerate TJX Companies  (TJX) reported quarterly earnings. The latter two, which cater to more cost-conscious customers, both beat expectations and raised their profit forecasts. But Macy’s slashed its sales guidance.

Many major retailers have recently noted waning consumer demand as years of persistent inflation and elevated interest rates seem to finally catch up with shoppers. But there’s more nuance to it: Americans are still happy to spend, as long as they feel like they’re getting a good deal. 

Macy’s — which owns several chains of mid- to high-end department stores, including its namesake stores and Bloomingdale’s, told investors that it will close 55 stores this year, more than previously expected. Its stock took a sharp dive following the report.

Meanwhile, TJX Companies — parent company of department stores like HomeGoods and TJ Maxx, which sell off-price goods — has seen consistent sales growth this year. 

As for Target, the company lowered prices on thousands of products in May after reporting a rare decline in sales in 2023. For now, it looks like the decision paid off. On the earnings call, CEO Brian Cornell attributed the strong last quarter in part to the price reductions.

Forecast

Given the price cut strategy’s apparent success, Target shoppers could potentially see more discounts in the coming months. Other retailers may even replicate the move in search of similar results. The trend may be worth noting for investors too. Successfully courting price-conscious consumers can evidently be a boon for bottom lines.

Zooming out, it’s also a promising sign for the broader economy. Economists have been concerned about a slowdown in consumer spending, which drives roughly two-thirds of U.S. economic growth. But rather than cutting back on spending overall, Americans are simply becoming more selective.

Disclaimer
SoFi Securities (Hong Kong) Limited and its affiliates (SoFi HK) may post or share information and materials from time to time. They should not be regarded as an offer, solicitation, invitation, investment advice, recommendation to buy, sell or otherwise deal with any investment instrument or product in any jurisdictions. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
SoFi HK does not make any warranties about the completeness, reliability and accuracy of this information and will not be liable for any losses and/or damages in connection with the use of this information.
The information and materials may contain hyperlinks to other websites, we are not responsible for the content of any linked sites. The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi HK. These links are provided for informational purposes and should not be viewed as an endorsement. The risk involved in using such hyperlinks shall be borne by the visitor and subject to any Terms of Use applicable to such access and use.
Any product, logos, brands, and other trademarks or images featured are the property of their respective trademark holders. These trademark holders are not affiliated with SoFi HK or its Affiliates. These trademark holders do not sponsor or endorse SoFi HK or any of its articles.
Without prior written approval of SoFi HK, the information/materials shall not be amended, duplicated, photocopied, transmitted, circulated, distributed or published in any manner, or be used for commercial or public purposes.