Retail earnings are painting a mixed picture of the consumer

Investors are getting a mixed picture of the consumer as retail earnings point to segments of both weakness and strength in shoppers. Discount retailer Dollar General (DG) and sandal brand Birkenstock (BIRK) both cited a discerning consumer who is becoming more selective with their purchases. Meanwhile, tech retailer Best Buy (BBY) has investors optimistic that it has reached a point of stabilization and return to growth.

Yahoo Finance Senior Reporter Brooke DiPalma joins Catalysts to break down the two conflicting representations of US consumers, while pointing to some potential catalysts that could boost consumer spending.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Melanie Riehl

Video Transcript

More retail names are out this morning giving us an inside look at the state of the consumer here, Dollar General and Birkenstock moving lower.

Both citing a discerning consumer who is being more selective with their purchases.

While best buy has investors optimistic that it reached the point of stabilization here.

With more.

We've got Yahoo finances.

Brooke the Palma.

Hey, hey, good morning to you both.

This continues to be a story of a very choosy consumer.

One that's really looking to buy somewhere and then not somewhere else and to kick things off, we saw that with Dollar General, what we saw in their report is a core customer who feels financially constrained.

We saw positive traffic trends overall at Dollar General, but that was partially offset by negative ticket.

We're seeing consumers there flock to groceries but they're not necessarily spending on bigger ticket items like home, home, seasonal and apparel.

They actually lower their fiscal 2024 outlook.

Same source sale.

They are expected to grow between 1 to 1 point 6% down from the previously expected range of 2 to 2.7.

And moving along to a specialty, I guess consumer facing company Birkenstock, you have that shoe company saying that the demand is there.

But consumers are being increasingly selective and more intentional with their spending and with that demand here in the America as they call it, they did see growth decelerate to f up 15%.

But that's down from the previous quarter when growth was up 21% and moving along to best buy.

This has been a attempt at a turnaround story.

Here, investors are excited about that stabilization.

They did see their slightest same source sales decline since Q four of 2022 same source of sales were down 2.3%.

And what they're seeing there is a consumer who is value oriented and innovation replacement oriented.

That's what CEO Coy Barry said on the call.

They now expect their earnings outlook to come in between $6.10 $6.35 that's higher from their previous guidance.

And they do anticipate that better than expected profitability to really boost in the back half of the year.

But something to watch out here for as consumers look to replace the goods that they got during the pandemic.

A I will play a part in that they're really thinking about.

Ok. Do I want to wait for the next A I I to come into concept to really replace?

And so when I, when young and spoke to the CEO this morning, she said that the actual co pilot plus that new concept came out during the quarter.

So it was a relatively small percent of a lift.

But as these new A I technology comes on board, it will then create a halo effect.

You'll see price points sort of play out.

Maybe people won't flock to the newest highest cost item, but maybe they'll go to that second tier item that has that technology but not as high as the new one perhaps.

So A I potential tail end for Best Buy.

But really, you just laid out a very mixed picture here, right?

So for you, you've been covering this space closely what's take away here as we wrap up earnings season about, you know, we keep saying the state of the consumer, I mean, is it just a bifurcated environment that we're dealing with?

What's the takeaway for you?

Yeah, I think we continue to chat about this is you see a consumer going to Wal Mart, but then again, investors wanted more from Abercrombie and Fitch.

And so it's a consumer who being very discerning with their dollars being really choosy.

And now really looking for value, you saw target cut prices on those household item goods tended to work.

You see consumers still focus on grocery but also willing to splurge if they think that the cost is worth it.

Uh maybe that specialty item good.

And so it'll be interesting to see how this plays out.

Of course, if interest rates come down if you know, mortgage rates change.

We we heard from Best Buy that appliances continues to do poorly for them.

But should the whole housing market improve then that could be a potential boost for them.

We'll see how the consumer can hold up to the end of the year.

Brook to Palma.

Thank you so much for that breakdown.