US consumer spending forecasts appear bleak.

Latest Signs⁤ of U.S.‌ Consumer Spending Under​ Stress

Latest results and forecasts from retailers ranging from ‍Macy’s to Foot​ Locker are showing‌ fresh signs of ​U.S. consumer ​spending⁣ remaining under stress heading into the second half of the year.

Middle-income Americans ⁢are spending less as many struggle to pay off existing card debts amid a surge in⁤ the cost of ‍living, raising⁤ worries for retail ‌sector investors betting on more business during the back-to-school and holiday ‍seasons.

“It is going to be a⁤ challenging back half,” said Telsey Advisory Group ⁢analyst Cristina Fernandez, adding that​ consumers are looking for value ⁤and spending on⁣ buying the things they need.

A bellwether for back-to-school demand, Foot Locker joined rival Dick’s Sporting ‍Goods on Wednesday‌ to⁢ cut the annual profit forecast, sending the⁤ shares of sportswear retailers tumbling.

“We did see a softening​ in trends in July and​ are adjusting our 2023outlook to allow us to best compete for price-sensitive ​consumers,”⁣ Foot ‍Locker CEO Mary Dillon said.

Both the companies along with Target have warned that profits⁢ have been under pressure from the loss of inventory due to instances‌ of‍ theft at their stores.

Kohl’s and​ Macy’s also ‌kept their annual‌ targets unchanged despite‌ beating profit expectations for the ⁣second quarter, with the latter warning of weak demand and a faster-than-expected ⁤rise in credit card payment ⁢delays.

“The macro environment is having ⁤the lion’s share ‌of the impact on credit and is a ‍real indicator of where we think the health ⁤of the consumer is… supporting our cautious⁣ approach,” Macy’s CFO Adrian Mitchell said on Tuesday.

Foot Locker and Macy’s could‍ see a bigger hit to‍ their sales as they cater to lower-to-middle income consumers, said ⁣Thomas Hayes, chairman of hedge fund Great Hill Capital, while ⁤the winners‌ would include​ Walmart and ‌the dollar stores that benefit from⁤ consumers trading down.

Walmart last week raised its ​full-year forecasts and ‍beat second-quarter results, benefiting from strong demand for its ⁢low-priced groceries.

“The consumer is still alive and well, but clearly more price conscious this year than last,” said Art Hogan, chief market ‍strategist at B ⁤Riley Wealth.

Conclusion

Despite some positive results, the retail ‌industry is facing challenges as U.S. consumer⁢ spending remains under ‌stress. Middle-income Americans are cutting back‌ on expenses due to high living costs and existing debts. This trend is concerning for investors who ‌were expecting increased‌ business during the back-to-school and ‍holiday⁢ seasons.

Foot Locker and Macy’s, which cater to lower-to-middle income consumers, are⁤ particularly ‌vulnerable to sales declines. On‌ the other ⁢hand, Walmart ‍and dollar stores‌ are⁢ expected ⁢to benefit from consumers trading ​down.

While there are still opportunities for growth, companies ‌need to‌ be mindful of the price-conscious ⁤consumer. The loss of inventory due to theft is also ⁤putting pressure on ⁢profits for some retailers.

Overall, ​the ‌health of‍ the consumer and the ⁤macroeconomic environment will continue‌ to ‌impact the retail sector. It remains to be seen​ how businesses will navigate these challenges and adapt⁤ to changing consumer ⁢behaviors.

(Reporting by Ananya Mariam Rajesh and Aishwarya Venugopal in Bengaluru; ⁤Editing by Arun Koyyur)