The Gloomy Retail Outlook In The United States Dims Chances For Strong Holiday Season Spending

The latest results and projections from retailers ranging from Macy’s M.N to Foot Locker FL.N demonstrate that consumer spending in the United States is still under pressure as the year enters the second half.

Middle-income Americans are spending less as they fight to pay off current credit card bills in the face of rising living costs, prompting concerns for retail sector investors expecting increased revenue during the back-to-school and holiday seasons.

“It’s going to be a challenging back half,” said Cristina Fernandez of Telsey Advisory Group, adding that customers are searching for value and spending on the things they need.

Foot Locker, a leading indicator of back-to-school demand, joined rival Dick’s Sporting GoodsDKS.N in lowering its annual profit prediction on Wednesday, sending shares of sportswear stores plummeting.

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

Both companies, along with Target TGT.N, have warned that inventory losses due to theft at their shops have put a damper on revenues.

Kohl’sKSS.N and Macy’s also maintained their yearly targets despite exceeding earnings forecasts in the second quarter, with the letter warning of sluggish demand and a faster-than-expected increase 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 consumer’s health is… supporting our cautious approach,” said Macy’s CFO Adrian Mitchell on Tuesday.

Foot Locker and Macy’s may take a heavier hit in sales because they cater to lower-to-middle class consumers, according to Thomas Hayes, chairman of hedge fund Great Hill Capital, while Walmart and dollar stores may profit from people moving down.

Walmart lifted its full-year predictions and exceeded second-quarter earnings last week, owing to robust demand for its low-cost foods.

Abercrombie & Fitch raises their revenue prediction as new apparel styles entice customers. 

Target takes a cautious tone as US shoppers become more frugal. 

In the midst of bleak North American spending, investors and analysts doubt Nike’s wholesale approach. 

WRAPUP 2-Strong retail sales in the United States demonstrate the economy’s resiliency.