The U.S. consumer economy is in a strange position right now, and there are plenty of reasons to be concerned about it.
With wild swings in the stock market, ongoing conflicts around the world, savings accounts depleting, and unemployment rates soaring, it’s no wonder many Americans are feeling uneasy.
These feelings are reflected, as is often the case, in the way we spend our money. This is especially true at both ends of the wealth scale: wealthy households are worried about their investment portfolios, and low-income families are being pushed to their limits by rising prices.
But for many in the middle of society, the days of carefree spending have now given way to a greater focus on good value for money.
This shift has put companies like Starbucks, PepsiCo and Whirlpool in a tight spot, reporting weak sales in recent weeks that their executives have largely attributed to the difficult consumer environment.
Still, retailers like Walmart, Target and TJX, which have built their reputation and strategy around offering good value, are likely to do well when they announce their earnings in the coming weeks.
This is a bright spot in an otherwise uncertain time: There is a lot that companies can do to meet the needs of American shoppers in the era of tight budgets.
Not only may Companies are doing something to help, but those who are helping seem to be doing quite well financially.
“There’s quite a bit of upside in many of the low-cost retailers here,” said Corey Tarlowe, retail analyst at Jefferies, pointing to a chart showing sales expectations for companies in the segment on a conference call with investors on Monday.
There are a number of reasons to be (cautiously) optimistic.
First, Costco’s long-standing goal has been to keep prices low and customer satisfaction high—an approach similar to the one Walmart currently takes.
In recent quarters, consumer trends that have been positive for one company have also affected the other, meaning Costco’s booming July sales numbers reported last week could be followed by positive quarterly results from Walmart on Thursday.
Tarlowe also highlighted transaction and customer traffic data that suggest Target’s summer discount strategy has boosted visits to the retailer, improving the prospect of strong sales results next week. In other words, Target’s Walmartification strategy appears to be paying off.
Meanwhile, Placer.ai’s footfall shows that discount retailers like TJX have had a strong start to the year, and Jefferies expects strong sales growth for the quarter when the company reports next week. Where better to find cheap clothing than at TJ Maxx, Marshall’s or Sierra by TJX?
Overall, it’s clear that many Americans are still spending money, they’re just increasingly careful to find the best deals.
Perhaps, after all the fuss about price gouging and “greedflation,” these examples could motivate more companies to look for new ways to invest in delivering real value to their customers.
It could well pay off.
