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“‘They are buying less stuff, even within food and beverage.’”
That was Target
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chairman and CEO Brian Cornell on Thursday, telling CNBC that consumers have been feeling financial pressures and are starting to cut back on spending.
“We look at overall retail spending, just look at the top line, you say, I got a really healthy consumer and they are spending,” Cornell said. “But even in food and beverage categories, over the last few quarters, the units, the number of items they’re buying, has been declining.”
Target has seen consumer spending decline for seven consecutive quarters, in terms of both the dollar amount and the number of units sold of discretionary goods such as clothes and toys, he said. “So you’re buying less apparel, fewer items for your home, fewer toys, you’re seeing some of the pressure in those categories.”
Consumers are managing their budgets “very carefully,” Cornell said. Not only are they not spending as much as before, they are also not buying the same items they purchased during the pandemic.
His comments come as consumers have been sending mixed signals about their financial well-being ahead of the holiday shopping season. Despite high inflation and high interest rates, consumer spending has remained robust, rising by 4% from July to September, helping to fuel a sharp annual increase in gross domestic product for the U.S. But economists have also said the current level of consumer spending might not be sustainable because households are relying on their savings to spend, and real wage growth is declining.
Big retailers including Target and Walmart
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will report their earnings for the third quarter in the week of Nov. 15. In the second quarter, Walmart’s CEO mentioned consumers were trading down to store brands and cheaper items, but said “food is a strength”. In October, Walmart said the popular weight loss drug Ozempic has been impacting shoppers’ demand for food items.
Walmart and Target did not respond to requests to comment immediately.
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