Consumers power the U.S. economy, and their capacity to spend has repeatedly defied predictions. In early 2020, after a short but severe recession caused by the pandemic, consumers splurged on big-ticket goods, from patio furniture to flat-screen TVs and home gym equipment. Then came what economists called \u201crevenge spending\u201d with experiences that were off-limits during lockdowns, like traveling and going to concerts, taking precedence.<\/p>\n
Now there are signs that some shoppers are becoming more cautious, as Americans\u2019 savings erode, inflation continues to bite and other factors tighten their wallets \u2014 namely, the resumption of student loan payments in October. Financial reports from retailers \u2014 including Macy\u2019s, Kohl\u2019s, Foot Locker and Nordstrom \u2014 that landed this week suggest a shift is underway, from consumers buying with abandon to spending more on their needs.<\/p>\n
\u201cLast year it was more psychological,\u201d said Janine Stichter, a retail analyst at the brokerage firm BTIG. \u201cBut now that we\u2019ve been dealing with inflation for as long as we have, I just think we\u2019re getting to a point where savings are depleted.\u201d<\/p>\n
In the aggregate, consumer spending remains solid. Retail sales in July were stronger than expected, leading some economists to raise their forecasts for economic growth this quarter. A robust labor market and rising wages have buoyed consumer confidence.<\/p>\n
But even retailers with strong sales say there are signs of economic strain among shoppers.<\/p>\n
\u201cIt is clear that the lower-income shopper, our core customer, is still under significant economic pressure,\u201d Michael O\u2019Sullivan, the chief executive of the off-price retailer Burlington Stores, said in a statement on Thursday. In the three months through July, Burlington saw a 4 percent rise in sales and more than doubled its profit.<\/p>\n
Discounters historically perform well during times of economic uncertainty as shoppers across the income spectrum look to save money. Burlington, along with Walmart, Dollar Tree and TJX, the owner of T.J. Maxx and Marshalls, all reported a rise in sales last quarter, as shoppers sought discounts on essential items like groceries, turned to cheaper private label products and reined in spending on discretionary goods.<\/p>\n
The strong performance at off-price and discount retailers stands in contrast to those at department store chains and many fashion and footwear retailers.<\/p>\n
In calls with Wall Street analysts this week, retail executives also flagged rising credit card delinquencies and higher rates of retail theft, ominous signs that consumers could be more strapped for cash.<\/p>\n
Jeff Gennette, the chief executive of Macy\u2019s, the largest department store in the United States, said shoppers had \u201cmore aggressively pulled back\u201d on spending in the discretionary categories, resulting in an overall decline in sales last quarter. Half of Macy\u2019s shoppers make $75,000 or less.<\/p>\n
\u201cThey are not converting as easily and becoming more intentional on the allocation of their disposable income,\u201d he said.<\/p>\n
\u201cProbably the most important thing people are spending money on is general merchandise,\u201d said Max Levchin, the chief executive of Affirm, which extends credit to shoppers at checkout via a so-called buy-now, pay-later model. \u201cPeople are looking for more value for less money, or simpler functionality and lower price,\u201d he said. The company reported an 18 percent rise in active customers from a year earlier.<\/p>\n
The finance chiefs of Macy\u2019s, Kohl\u2019s and Nordstrom told analysts that delinquencies on the department stores\u2019 credit cards had risen. In Macy\u2019s case, the increase in nonpayments last quarter was \u201cfaster than expected.\u201d<\/p>\n
\u201cWhen people are not paying their credit card bills, that suggests a really stretched consumer,\u201d Ms. Stichter of BTIG said.<\/p>\n
And that means consumers are being more selective about where they shop and what they buy.<\/p>\n
\u201cYou\u2019re going to see brands that are winners and losers,\u201d Fran Horowitz, the chief executive of Abercrombie & Fitch, said in an interview. The fashion retailer reported a jump in sales of more than 10 percent last quarter, as it was able to \u201cchase\u201d the new styles that got more shoppers through the doors, Ms. Horowitz said.<\/p>\n
By contrast, on the same day Foot Locker reported a sales decline of nearly 10 percent for the quarter, it also cut its forecast for 2023 earnings for the second time this year, citing \u201congoing consumer softness.\u201d<\/p>\n
The back-to-school shopping season now underway is crucial for retailers, a harbinger of whether there will be strong sales for the rest of the year.<\/p>\n
And a new dynamic will soon come into play. In October, student loan payments will resume for about 44 million Americans, after a pandemic relief measure put them on hold in March 2020. Retail executives have warned that the payment resumption could further squeeze their shoppers\u2019 budgets.<\/p>\n
Halloween, which is just weeks after repayments resume, will also be a barometer for people\u2019s willingness to spend on discretionary items like costumes and candy, said Nikki Baird, vice president of strategy at Aptos, a technology company that works with retailers like Crocs, L.L. Bean and New Balance.<\/p>\n
She said that the repayments will most affect the age group that typically spends on Halloween. \u201cI think that will really tell us what does this mean for the holiday season,\u201d Ms. Baird said. \u201cIf Halloween is a bust, then I think we have to really start looking at whether consumers are going to go big for Christmas, because I think it says they won\u2019t.\u201d<\/p>\n
An earlier version of this article misspelled the surname of a retail analyst at the brokerage firm BTIG. She is Janine Stichter, not Stitcher.<\/p>\n
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