The Influence of Consumer Spending Trends on Retail Stock Performance

Economic Conditions and Consumer Spending

Economic conditions have remained relatively stable, but factors like inflation, interest rates, and geopolitical uncertainties continue to influence consumer spending patterns, impacting retail performance.

"Consumer economic conditions have been relatively consistent since the start of the year." --- (WMT, earning call, 2025/Q1)

"These risks and uncertainties include, but are not limited to, domestic and international economic conditions, including exchange rates, inflation or deflation, the effects of competition and regulation, uncertainties in the financial markets, consumer and small business spending patterns and debt levels, breaches of security or privacy of member or business information, conditions affecting the acquisition, development, ownership or use of real" --- (COST, press release, 2024/07/10)

"Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic and geopolitical conditions and customer demand and spending (including the impact of recessionary fears), inflation, interest rates, regional labor market constraints, world events, the rate of growth of the internet, online commerce, cloud services, and new and emerging technologies, and the various factors detailed below." --- (AMZN, press release, 2024/08/01)

"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)

"And while it might be a little much to expect every quarter to be this good, we feel really good about the performance and it demonstrates how this business can perform when we're firing on all cylinders. Consumer economic conditions have been relatively consistent." --- (WMT, earning call, 2025/Q1)

Current Consumer Spending Trends

Retailers like Target and Walmart are responding to inflation and high interest rates by lowering prices and managing inventory to meet consumer demand, while Costco reports strong comparable sales growth, indicating resilient consumer spending trends despite economic pressures.

""Our teams work hard to deliver great value every day, and these new lower prices across thousands of items will add up to additional big savings for the millions of consumers that shop Target each week for their everyday needs." New lower prices for Memorial Day and every day Consumers will find reduced prices on everyday items needed to run their households and maximize their budgets, especially as they stock up for Memorial Day, Fourth of July and back-to-school and back-to-college season." --- (TGT, press release, 2024/05/20)

"Consumer groups have raised concerns about potential food price increases at a time when people are already struggling with inflation and high interest rates." --- (WMT, press release, 2024/07/26)

"Comparable sales were as follows: 5 Weeks 44 Weeks U.S. 5.6% 4.4% Canada 5.2% 7.3% Other International 4.3% 8.5% Total Company 5.3% 5.4% E-commerce 18.4% 15.2% Comparable sales excluding the impacts from changes in gasoline prices and foreign exchange were as follows: 5 Weeks 44 Weeks U.S. 6.3% 4.8% Canada 8.4% 8.1% Other International 8.7% 8.1% Total Company 6.9% 5.6% E-commerce 19.1% 15.2% Additional discussion of these results is available in a pre-recorded message." --- (COST, press release, 2024/07/10)

"Although they make it look easy, managing in the current environment is anything but straightforward, and it is their passion and talent that allows us to drive great interactions with our guests to keep inventory lean and yet improve our in-stock positions and set us up quarter after quarter to help all families discover the joy of everyday life." --- (TGT, earning call, 2025/Q1)

"The 14% trend represented an increase from the previous year but fell within the range of 10-15% consistently seen in the years of this report's history." --- (WMT, press release, 2024/07/25)

Sector-Specific Trends in Retail

Costco leverages operational efficiencies to maintain profitability at lower margins, while Best Buy faces declining retail turnover. Walmart focuses on U.S. comparable sales, and Lowe's adapts to consumer trends favoring smaller, value-focused home improvement projects. Target highlights the variability in comparable sales measures across the retail industry.

"When combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities, these volumes and turnover enable us to operate profitably at significantly lower gross margins (net sales less merchandise costs) than most other retailers." --- (COST, sec filing, 2024/Q3)

"Our Q1 retail turnover trended down versus last year and remains lower than industry averages and our recent employee engagement survey shows our people have strong levels of connection, engagement and belonging that are at or above the global benchmark." --- (BBY, earning call, 2025/Q1)

"We focus on comparable sales in the U.S. as we believe it is a meaningful metric within the context of the U.S. retail market where there is a single currency, one inflationary market and generally consistent store and club formats from year to year." --- (WMT, sec filing, 2025/Q1)

"So given these trends, as we look at home improvement spend in the near term, we think it's going to be focused more on smaller projects and looking for value, and we are working to position ourselves to be in that space as effectively as we can." --- (LOW, conference, 2024/06/26)

"Comparable sales measures vary across the retail industry. As a result, our comparable sales calculation is not necessarily comparable to similarly titled measures reported by other companies." --- (TGT, sec filing, 2024/Q1)

E-commerce vs. Brick-and-Mortar Performance

Retailers are increasingly integrating e-commerce and brick-and-mortar operations, making it challenging to separate their performance. Companies like Walmart and Costco emphasize technology to enhance both channels, while Amazon invests in physical stores and logistics. Despite e-commerce's lower margins, the convergence trend is evident across the industry.

"Before I answer though, Bob, like we are seeing in our business that e commerce and brick and mortar are increasingly converging, and it's going to be more and more difficult over time to separate those out and really scrutinize the profitability of each of those segments. So omni is truly becoming omni." --- (WMT, event transcript, 2024/06/07)

"Technology is going to be one of our key priorities moving forward. How do we improve that member engagement and the relationship we have with them in our brick-and-mortar warehouses as well as online and through other aspects such as travel and so forth." --- (COST, earning call, 2024/Q3)

"The Expansion Marks Inaugural Brick-and-Mortar Retailer Presence in the U.S. for the Award-Winning, Global Beauty Brand NEW YORK, June 18, 2024 /PRNewswire/ -- Ulike, the global leader and pioneer of IPL (Intense Pulsed Light) hair removal, announces today its launch in Best Buy stores nationwide and availability on BestBuy.com." --- (BBY, press release, 2024/06/18)

"And we continue to see strong CapEx performance in our stores business. Most of that will be related to modest capital or capacity increases in addition to our same-day fulfillment network and some Amazon Logistics upgrades to the fleet." --- (AMZN, earning call, 2024/Q1)

"So the you get the lift in e commerce and maybe this would be a good place to walk us through another question we get all the time is e commerce is it is a lower margin business versus in store and that shift in that and any pressure from that?" --- (WMT, conference, 2024/06/25)

Seasonal Spending Patterns

Seasonal spending patterns, such as increased consumer expenditure during events like the Fourth of July, significantly boost retail performance. Walmart's focus on low prices during these periods and the strong impact of seasonal events internationally have positively influenced their stock performance.

"Walmart offers Every Day Low Prices all summer long! (Photo: Business Wire) This year, The National Retail Federation has reported that consumers are expected to spend an average of $90 on food items for Fourth of July celebrations." --- (WMT, press release, 2024/06/27)

"The first of those is just strong seasonal events in the first -- in international that helped us." --- (WMT, earning call, 2025/Q1)

Technological Advancements in Retail

Technological advancements in retail, such as Amazon's efficient ad spending and Walmart's use of advanced robotics, are transforming customer engagement and operational efficiency, potentially boosting consumer spending and retail stock performance.

"This advancement leads to more efficient ad spending and higher customer engagement levels, transforming how ads are crafted and delivered." --- (AMZN, press release, 2024/06/13)

"Each job brings with it an opportunity to grow a career at Walmart. "We're proud to create new opportunities for our associates, equipping them with the skills to manage the advanced robotics technology transforming our business," said Ervin Goad, general manager of the new facility." --- (WMT, press release, 2024/07/16)