Americans Are Shopping Smarter, Not Harder
Estimated reading time: 3 minutes
After five consecutive months of rising retail sales, it’s clear that American consumers aren’t afraid to treat themselves, even in an uncertain economic landscape.
Discretionary spending is bouncing back from its pandemic slowdown, helped, in part, by high prices that keep sales chugging along.
And that’s just it: Higher prices mean Americans are pickier about where and how they spend.
Current spending patterns aren’t uniformly benefiting every retailer. Major stores like Target (TGT) have seen a pullback on goods that are necessities, leading the department store giant to slash its full-year outlook.
At the same time, demand for some high-end products is as healthy as ever. Lululemon (LULU) reported an 11% spike in sales last quarter, even as its leggings are priced around the $100 mark. The company’s recently-announced partnership with Peloton (PTON) sent the latter’s shares soaring 15% on the news. This suggests both brand and quality still matter to consumers — and they may be willing to downgrade on other things in order to afford it.
Another retailer profiting off the high price environment is T.J. Maxx (TJX), which saw a 7.7% rise in sales, signaling its selection of premium items at discounted prices is striking the right chord with shoppers seeking value in both price tags and labels.
Why does all this matter? Shopping behavior is important because much of the U.S. economy is driven by consumer spending. If people keep their wallets shut, that’s bad for economic growth.
For now, Americans are still spending, they’re just selective about it. With the holiday shopping season gearing up, retailers, economists and investors will keep their eyes on the cash register.
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