Nov 17, 2022 - Economy

Inflation-proof demand fuels retail spending

Illustration of multiple vintage price tag stickers stuck one on top of the other.

Illustration: Aïda Amer/Axios

A mixed bag of reports from mega retailers this week reveals where consumers are immune to inflation.

Why it matters: Record levels of price increases this year have hurt many families, but in some cases, a return to pre-pandemic attitudes and activities has overruled cautious spending.

Driving the news: Makeup was in high demand last quarter, driving sales for Macy's and Kohl's, the companies reported today.

  • "[People] see this as a need ... even during inflationary times, they need to replenish their lipstick or makeup or cosmetics and skin care," Jill Timm, Kohl's CFO, told analysts on a call.
  • Luggage, dressy clothing, career apparel, fragrances and shoes were also big drivers for Macy's as travel and events have rebounded.
  • Then there's home improvement and decor, which continued to be a popular pastime and helped Home Depot and Lowe's reach strong results.

The big picture: Grocery and gas still dominate household budgets, which propelled BJ's and Walmart in the third quarter.

  • BJ's CEO Bob Eddy said this morning that they're continuing to see an increase in shopping from lower-income households, which he attributed to "value" offerings.
  • Interestingly enough, higher income households sought more deals too — flocking more frequently to BJ's and Walmarts — as they also continued to splurge on handbags and gifts at Macy's.

What they're saying: Middle-income consumers are getting particularly squeezed, buying fewer items per trip and trading down to "value-oriented private brands," Kohl's CFO Jill Timm noted.

What to watch: Retail executives were cautiously optimistic about the current quarter — suggesting consumers are expecting heavy discounts this year and waiting closer to the holidays to buy.

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