Advertisement
Canada markets open in 58 minutes
  • S&P/TSX

    24,471.17
    +168.87 (+0.69%)
     
  • S&P 500

    5,859.85
    +44.82 (+0.77%)
     
  • DOW

    43,065.22
    +201.36 (+0.47%)
     
  • CAD/USD

    0.7230
    -0.0019 (-0.26%)
     
  • CRUDE OIL

    70.84
    -2.99 (-4.05%)
     
  • Bitcoin CAD

    90,607.51
    +1,097.41 (+1.23%)
     
  • XRP CAD

    0.74
    +0.00 (+0.15%)
     
  • GOLD FUTURES

    2,671.40
    +5.80 (+0.22%)
     
  • RUSSELL 2000

    2,248.64
    +14.23 (+0.64%)
     
  • 10-Yr Bond

    4.0980
    0.0000 (0.00%)
     
  • NASDAQ futures

    20,628.00
    +8.75 (+0.04%)
     
  • VOLATILITY

    19.71
    +0.01 (+0.05%)
     
  • FTSE

    8,264.60
    -28.06 (-0.34%)
     
  • NIKKEI 225

    39,910.55
    +304.75 (+0.77%)
     
  • CAD/EUR

    0.6632
    -0.0010 (-0.15%)
     

Why American consumers are 'choiceful' right now

From big box chains to home improvement retailers to dollar stores, US consumers are being picky with their dollars.

"Steady, choiceful, value-seeking — that's the consumer," Goldman Sachs managing director Kate McShane told Yahoo Finance at the Goldman Sachs Annual Global Retailing Conference last week.

The environment has been a win for Walmart (WMT). In August, it reported another solid quarter, with US same-store sales up 4.3%.

"We know that they're looking for value and their dollars are stretched; they're focusing in on those things that are providing value for them; they're being choiceful when they buy the larger-ticket items," CFO John David Rainey told Yahoo Finance.

Refinitiv's Jharonne Martis said on Yahoo Finance's Catalysts that middle-income shoppers are "thinking twice about any expenditures over $1,000 and even thinking twice about now opening up more credit or financing anything that's a big purchase."

Target (TGT) also beat Wall Street's estimates across revenue, earnings, and same-store sales after it lowered prices on frequently shopped items like milk, bread, yogurt, and snacks.

CEO Brian Cornell said the team feels "great about the [customer] reaction" to the price reduction on 5,000 items and believes it "contributed to traffic growth during the quarter" with expectations for that to last through the rest of the year.

Read more: Best credit cards for back-to-school shopping at Target (September 2024)

Dollar General (DG) and Dollar Tree (DLTR) are feeling the heat, though, with both dollar stores posting disappointing results.

McShane said Dollar General's audience caters to a "much lower-income consumer," with 60% of its audience making $30,000 annually or less.

Dollar General truck is seen parked by a highway in the United States of America, on July 8th, 2024.
 (Photo by Beata Zawrzel/NurPhoto via Getty Images)
Dollar General truck is seen parked by a highway on July 8, 2024. (Beata Zawrzel/NurPhoto via Getty Images) (NurPhoto via Getty Images)

"[That] consumer doesn't have enough money to keep purchasing through the end of the month," McShane said.

At the conference, Dollar General CEO Todd Vasos said the "middle-income customer and upper middle is still gainfully employed," but "the economy is slowing at a pretty decent clip." However, the competition for middle-income consumers is stiff with Walmart in the mix.

"It used to be that consumers used to go into a Walmart and they only stuck to those groceries... But now since the pandemic, Walmart has gained more customers. They've increased their selection to those everyday low-price items," said Martis.

"These new customers that are coming now to Walmart are not just only buying groceries, but then they're also picking up these discretionary items, and therefore, the dollar stores are losing those market shares."

Home improvement retailers Home Depot (HD) and Lowe's (LOW) could see a change in tide soon after both said consumers are putting off big-ticket projects in anticipation of lower interest rates.

"Housing turnover has been a real headwind ... until you do see some unlock in interest rates and mortgage rates come down, that housing turnover number is going to continue to be soft," McShane said.

Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

Click here for all of the latest retail stock news and events to better inform your investing strategy