Americans Are Becoming Bargain Hunters

A Tale of Three Retail Reports

Company earnings can give us a lot of insight into the business cycle and the state of the economy. And in the case of recent results from the retail industry, it can shed light on how Americans are spending their hard-earned cash.

The results were clear: Americans are still spending, but they’re getting more selective.

Bargains Are In

Earlier this week, Macy’s (M), Target (TGT), and discount store conglomerate TJX Companies (TJX) reported quarterly earnings. The latter two, which cater to more cost-conscious customers, both beat expectations and raised their profit forecasts. But Macy’s slashed its sales guidance.

Many major retailers have recently noted waning consumer demand as years of persistent inflation and elevated interest rates seem to finally catch up with shoppers. But there’s more nuance to it: Americans are still happy to spend, as long as they feel like they’re getting a good deal.

Macy’s — which owns several chains of mid- to high-end department stores, including its namesake stores and Bloomingdale’s, told investors that it will close 55 stores this year, more than previously expected. Its stock took a sharp dive following the report.

Meanwhile, TJX Companies — parent company of department stores like HomeGoods and TJ Maxx, which sell off-price goods — has seen consistent sales growth this year.

As for Target, the company lowered prices on thousands of products in May after reporting a rare decline in sales in 2023. For now, it looks like the decision paid off. On the earnings call, CEO Brian Cornell attributed the strong last quarter in part to the price reductions.

Forecast

Given the price cut strategy’s apparent success, Target shoppers could potentially see more discounts in the coming months. Other retailers may even replicate the move in search of similar results. The trend may be worth noting for investors too. Successfully courting price-conscious consumers can evidently be a boon for bottom lines.

Zooming out, it’s also a promising sign for the broader economy. Economists have been concerned about a slowdown in consumer spending, which drives roughly two-thirds of U.S. economic growth. But rather than cutting back on spending overall, Americans are simply becoming more selective.

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