Client Letters: Q1 23 Retail Earnings Reports & Census Spend Growth
A number of retailers have provided earnings this week. There were some notable comments giving us a bit of insight on the consumer and impact of inflation:
Walmart - Comps were +7% on the strength of grocery. The CFO noted, “a strong consumer remains yet they are purchasing smaller pack sizes. We’re seeing in these economic indicators that there is some strain on the consumer, but the resilience has surprised us. And I think that’s in part probably because balance sheets are much stronger than they were pre-pandemic, even at this point.”
Target - Sales were up slightly and management is calling for single digit negative to positive comps for the remainder of the year. “We believe the consumer remains resilient, but we are seeing some early signs of softening in demand, particularly in discretionary categories.”
TJ Maxx - Comps on the US side were +5% for Marmaxx and +1% for Canada as HomeGoods were -7%. Forward looking the company is calling for a modest rise in comps.
Earlier this week the Census Bureau released the monthly sales for April. Non-store (aka Amazon and online) posted a +8% year over year but the overall top line growth in overall sales is becoming quite difficult:
On the marketplaces side of the business we have not seen any major weakness in total sales but have seen a slight decline in traffic and a dip in conversion. The dip in traffic is largely due to a customer more willing to return to brick and mortar and we believe the dip in conversion as evidence of a slightly more selective consumer.
Bottom line: The majors are cautiously optimistic yet clearly saw a slowing in the consumer towards the back half of last quarter and start of Q2. Keep in mind, inflation adjusted every comp was essentially flat to down. We remain optimistic on marketplaces yet recognize a more selective consumer.
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Please reach out with any questions,
Ryan Craver
Disclosure: Client Letters are intended for Commerce Canal clients, investors and employees. Commerce Canal and its officers, directors and employees provide this content for informational purposes only.
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