Retail Stocks: The Role of Consumer Confidence

Current Consumer Confidence Trends

Current consumer confidence trends are marked by uncertainty due to inflation, economic instability, and geopolitical issues. Retailers like Walmart and Target note consumer concerns about the future, while Amazon observes weaker confidence in Europe. Costco questions if market share gains, rather than improved consumer confidence, drive category performance.

"Other Information ." We expect continued uncertainty in our business and the global economy due to inflationary trends, a challenging macro environment, geopolitical conditions, supply chain disruptions, volatility in employment trends and consumer confidence." --- (WMT, sec filing, 2025/Q1)

"And even as inflation moderates and we see sequential improvement in discretionary category trends, higher interest rates, uncertainty around the future of the economy, continued social and political divisiveness and the upcoming election cycle have consumers concerned about what lies ahead." --- (TGT, earning call, 2025/Q1)

"As part of our guidance considerations, we also continue to keep an eye on consumer spending and macro level trends, specifically in Europe, where it appears to be a bit weaker relative to the US." --- (AMZN, earning call, 2024/Q1)

"In other words, are you gaining share and that's what's really driving your improvements in some of these categories like electronics and appliances and big ticket rather than the consumer actually getting better." --- (COST, earning call, 2024/Q3)

"So I guess the question is and this is happening at a time when other retailers are maybe doubling down on opening price point and are not seeing a stable consumer.So I guess my question is, how do you maintain the balance of being known for price and value and convenience too, but also welcoming these higher income consumers? And is that a delicate balance that you think about?" --- (WMT, event transcript, 2024/06/07)

Macroeconomic Influences on Consumer Confidence

Macroeconomic challenges such as geopolitical tensions, inflation, and high interest rates create economic uncertainty, impacting consumer confidence and retail stocks. Companies like JPMorgan Chase and Bank of America acknowledge these influences, while Apple emphasizes managing through uneven economic conditions to maintain consumer focus.

"And we now hold greater than 15% share in 33 of the top 125 markets. The macroeconomic environment can influence results year to year, but we're confident our strategies will continue to drive sustained share gains over time." --- (JPM, event transcript, 2024/05/20)

"Various macroeconomic challenges, including geopolitical tensions, inflationary pressures and elevated interest rates, have led to uncertainty in the U.S. and global economies and have adversely impacted, and may continue to adversely impact, a number of industries." --- (BAC, sec filing, 2024/Q1)

"As we push innovation forward, we continue to manage thoughtfully and deliberately through an uneven macroeconomic environment and remain focused on putting our users at the center of everything we do." --- (AAPL, earning call, 2024/Q2)

"• $609 million in consumer , driven by Card Services, predominantly due to loan growth and updates to certain macroeconomic variables, and • $189 million in wholesale , driven by the impact of incorporating the First Republic portfolio into the Firm’s modeled credit loss estimates, as well as net downgrade activity, primarily in Real Estate, largely offset by the impact of changes in the loan and lending-related commitment portfolios." --- (JPM, sec filing, 2024/Q2)

"And we show you that on this page, slide four, by line of business. While wealth business deposit rates have moved higher with continued rotation, we expect those rates to begin to stabilize and the rate of quarterly change to decrease going forward.Turning to slide five, in previous calls, many of you asked questions or commented upon the question about consumer net charge-offs and when would they stabilize in the second-half of 2024." --- (BAC, earning call, 2024/Q2)

Impact on Retail Sales and Revenue

Retailers like Costco, Target, Amazon, Home Depot, and Walmart have experienced varied impacts on sales and revenue due to consumer confidence. While Costco and Target faced revenue declines, Amazon and Walmart saw increases, highlighting the direct correlation between consumer confidence and retail performance.

"Our investments in merchandise pricing may include reducing prices on merchandise to drive sales or meet competition and holding prices steady despite cost increases instead of passing the increases on to our members, negatively impacting gross margin and gross margin in the near term as a percentage of net sales (gross margin percentage)." --- (COST, sec filing, 2024/Q3)

"• Total revenue was $24.5 billion, a decrease of 3.1 percent from the comparable prior-year period, reflecting a total sales decrease of 3.2 percent and a 3.9 percent increase in other revenue." --- (TGT, sec filing, 2024/Q1)

"In 2023, we had meaningful improvement across our financial results. Net sales were $575,000,000,000 an increase of $61,000,000,000 year over year or 12% excluding the impact of foreign exchange." --- (AMZN, event transcript, 2024/05/22)

"The decrease in net sales for the first quarter of fiscal 2024 largely reflects the impact of a negative comparable sales environment, primarily driven by decreases in comparable customer transactions and comparable average ticket, partially offset by sales from new stores and the acquisitions we completed in fiscal 2023." --- (HD, sec filing, 2024/Q1)

"The increase was primarily due to comparable sales, including fuel, of 4.6% for the three months ended April 30, 2024, which benefited from growth in transactions, including strong sales in grocery and consumables and health and wellness." --- (WMT, sec filing, 2025/Q1)

Sector-Specific Performance

Target's fashion-forward and owned brands, Costco's innovation in non-foods, Walmart's consistent growth, and TJX's customer-driven transactions all highlight strong sector-specific performance, driven by consumer confidence and strategic initiatives.

"That was based on the backs of ready-to-wear, our perhaps most fashion-forward part of our entire assortment, our performance business, our young contemporary business, those are big owned brands that we control, design and build; All in Motion, Wild Fable, A New Day, et cetera, punctuated by a great partnership with Diane von Furstenberg." --- (TGT, earning call, 2025/Q1)

"Could you speak to some of the innovation you're seeing in non-foods and anything else you think is driving some of the performance, particularly in discretionary categories." --- (COST, earning call, 2024/Q3)

"If you look at our performance last year, combined with what our guidance is this year, it would suggest that we've on a 2 year basis grown on average the top line about 5% and the bottom line more than 8%." --- (WMT, conference, 2024/06/25)

"Now to our first quarter divisional performance. Across all our divisions, our comp increases were entirely driven by customer transactions, which again is such a great indicator of the strength of our value proposition." --- (TJX, earning call, 2025/Q1)

"Roundel is already making a meaningful contribution to our performance, and it's the fastest-growing part of our business." --- (TGT, earning call, 2025/Q1)

Retailers' Strategic Responses

Retailers are strategically adapting to consumer confidence shifts by balancing operations (Best Buy), transforming supply chains (Walmart), strengthening partnerships (Target), supporting small businesses (Amazon), and evolving business models with technology (Costco).

"We are strategically operating our business, balancing our response to the pressured sales environment." --- (BBY, earning call, 2025/Q1)

"Increased Capacity, Faster Replenishment Speeds Perishable distribution centers are a strategic part of Walmart's supply chain transformation and keep its more than 4,600 stores stocked with fresh and frozen merchandise." --- (WMT, press release, 2024/07/16)

"Additionally, Hennington will be responsible for further strengthening relationships with Target's strategic partners and identifying new partnerships that will differentiate and drive the retailer's business. Hennington will continue to report to Cornell." --- (TGT, press release, 2024/06/25)

"Aimed at being a strategic partner for growth, the Studio supports small business owners at every step of their journey, fueling inspiration, education, and community. Small Business Grants Program" --- (AMZN, press release, 2024/05/01)

"Michael Lasser: My follow-up question is, given some of the changes in leadership over the last year or so, is there any thought given to being more aggressive with some of the evolution on the model, things like buy online pickup in-store, deploying more technology in the store or capitalizing on the ever so great amounts of data that Costco has in the form of trying to monetize it through retail media. Thank you very much." --- (COST, earning call, 2024/Q3)

Technological and Innovation Trends

Retailers are leveraging technological advancements and innovation to enhance customer experiences and operational efficiency. Best Buy cycles through older products with new tablet launches, Amazon invests in tech to scale and improve processes, Walmart uses automation and robotics, and Target collaborates with partners to bring innovative products to market.

"One, we saw a trend change in tablets. So as we saw both the new launches, the Pro and the new Air, as well as some of the deals on the older generations, because I think sometimes what people forget is sometimes when you get the new innovation, it allows you to cycle through some of the older [indiscernible] product as well." --- (BBY, earning call, 2025/Q1)

"We seek to invest efficiently in numerous areas of technology and infrastructure so we may continue to enhance the customer experience and improve our process efficiency through rapid technology developments, while operating at an ever increasing scale." --- (AMZN, sec filing, 2024/Q1)

"As part of this transformation, the retailer is building and transforming facilities with state-of-the-art automation and robotics, while evolving strenuous, manual jobs into more rewarding roles that provide opportunities to learn new skills in technology." --- (WMT, press release, 2024/04/30)

"Our partners know our playbook. They understand how we go to market, and they are terrific partners in bringing that experience to light, in bringing us great products, innovation and contributing to the value equation for Target." --- (TGT, earning call, 2025/Q1)

"Those are things and again this is a bit regardless of industry. Innovation is part of what's going to stimulate the goods demand and if you don't have it it is hard to see a consumer in there." --- (BBY, conference, 2024/06/10)

Future Outlook and Predictions

Amazon and Target express optimism about their future financial and operational performance, while Walmart highlights the challenges in predicting future trends and managing inventory. Amazon also acknowledges the inherent uncertainties in inventory assumptions, indicating a cautious yet hopeful outlook for retail stocks.

"From my perspective, I have more enthusiasm and optimism for Amazon's future than ever. We continue to make meaningful progress in our customer experiences and financial results." --- (AMZN, event transcript, 2024/05/22)

"The principal forward-looking statements in this report include statements regarding: our future financial and operational performance, the adequacy of and costs associated with our sources of liquidity, the funding of debt maturities, the execution of our share repurchase program, our expected capital expenditures and new lease commitments, the expected compliance with debt covenants, the expected impact of new accounting pronouncements, our intentions regarding future dividends, the expected return on plan assets, the expected outcome of, and adequacy of our reserves for, claims, litigation, and the resolution of tax matters, and changes in our assumptions and expectations." --- (TGT, sec filing, 2024/Q1)

"But things could change. And again, it's hard to call the future. So we really we watch units closely, so we can buy a lot of our categories that we buy 6 and in some cases 12 months out." --- (WMT, conference, 2024/06/11)

"These assumptions about future disposition of inventory are inherently uncertain and changes in our estimates and assumptions may cause us to realize material write-downs in the future." --- (AMZN, sec filing, 2024/Q1)