Two emerging threads from retail earnings

Earnings from retailers like Walmart (WMT), Target (TGT), TJX (TJX), and Macy's (M), along with jobs and retail data are painting a very mixed picture of the US consumer.

LSEG Director of Consumer Research Jharonne Martis joins Wealth! to give insight into the US retail numbers and recent retail earnings say about the consumer and what trends investors can expect from consumers.

"There are two common denominators right now that are jumping out. The first one being that as you mentioned, retailers are all about the omnichannel strategy. And this is what's important in order to attract the consumers to the stores. Home Depot (HD), Walmart, Lowe's (LOW) yesterday all told us, and even Target today they smashed their e-commerce estimate with a robust 8.3% growth in e-commerce. Consumers are are ordering things on their mobile phones and then wanting to pick them up in store on their way from work to home. And so this is really what's driving sales," says Martis

Martis points out how consumers are really focused on value, "they are shopping at the discounters, off-price retailers." She adds "The trend this year has been like you saw July retail sales... really smashing expectations. And that was because the average promotional rate and the amount of merchandise on sale really spiked to the highest level it did all year round. So we're going to continue to see things like this around Labor Day weekend, already people are shopping for Halloween."

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This post was written by Nicholas Jacobino

Video Transcript

Consumers are increasingly going digital and looking for deals, as evidenced by earnings reports from retail giants Target, TJ, X and Macy's.

The Wednesday morning releases all provided more insight into the consumer mindset and the ability to spend diving further into the data with her own prognosis.

We have with us in studio.

Jerome Marti, LSEG director of consumer research Jerome Great to have you here with us on the programme.

So first and foremost, you look across these reports.

Is there one common denominator that really jumps out about the consumer right now?

Well, good morning, Brad.

There are two common denominators right now that are jumping out, the first one being that, as you mentioned, retailers are all about the Omni Channel strategy, and this is what's important in order to attract the consumers to the stores.

Home Depot, WalMart, Lowe's yesterday all told us and even, um, target.

Today they smash their E Commerce Estimate with a robust 8.3% growth in E commerce.

Consumers are are ordering things on their mobile phones and then wanting to pick them up in store on their way from work to home.

And so this is really what's driving sales not only at the big retailers but also with US retail sales.

The second trend we're seeing is that consumers are extremely value oriented.

Um, they are shopping at the discounters, uh, off price retailers when a time when we're receiving a lot of negative guidance.

We saw TJ X telling us today that actually, the third quarter is off to a great start when other retailers are telling us not to expect too much from them for the third quarter.

So of the retailers that we've continued to hear from over the course of this earnings season, and there are still a few more to to trickle out.

But we've heard Walmart say that even the higher end consumers trading into their company is there a company that is best positioned right now, given the deal hunting the value hacking that consumers are doing well, there's one particular company that analysts pulled by EC are bullish on.

In fact, our star mine data tells us that this company is likely to beat earnings estimates next week and post a positive surprise.

And this is gap because of its old Navy division, which is a big winner right now for parents who are, you know, no matter how the economy is doing, back to school happens every year and parents are budgeted for it.

They are looking to save money and old.

A Navy is able to do that for them.

So as a result, that's one particular, uh, company that we are bullish on.

And then teen retailers Amber, Commie and American Eagle have a very loyal following for the back to school season.

So those are the three names that we're watching next week.

It seems like right now that the best smart shopping habits that consumers are starting to deploy is being very choosy about the deals and waiting for deals that propensity to wait.

That's gonna impact companies, bottom lines that impacts the inventory that they're able to move through.

So of the people of the consumers out there that are like you and I were talking about before, we even came on set waiting and keeping things in their shopping cart and just waiting for that price to trickle down and and move lower, you know, where are we bound to see more of those deals start to come to light as Well, well, definitely.

Um, So the trend this year has been like you saw July retail sales were, you know, really smashing expectations.

And that was because the average promotional rate and the amount of merchandise on sale really spiked to the highest level it did all year round.

So this we're gonna continue to see things like this around Labour Day weekend.

Um, already, people are shopping for Halloween.

I just spoke to your makeup artist.

He's already shopping for Christmas, uh, holiday season.

So people are already eyeing what is on sale now, putting it in their closet and saving it, you know, for for those later, um, moments.

But make no mistake, the consumer is only opening up their wallets if they see that there's a discount.

Um, Home Depot told us that they are thinking twice about those big ticket items.

Um, over $1000.

They actually were down 6%.

So consumers, if they're opening up their wallet right now, is just for the things that they need, Like apparel for back to school and items like that.

Yeah, that's really interesting.

And I I mean, look, I can't really say too much because I, too, did shop early for and it ultimately is.

Perhaps my first Amazon purchase ever.

Uh, my Halloween costume, just to make sure that I had it, uh, to be revealed.

But as we're continuing to watch right now with consumers, the ticket itself is also decelerating.

Moving lower.

Declining, I should say, Actually, what do you make of that?

Yeah, absolutely.

Even in today's targets.

Numbers, right.

They told us that consumers did open up their wallet for discretionary items, but they were gravitating towards the private label items that are at a much lower cost point.

So if they are opening up their, um, their wallets, it's for the discounts.

The lower price points and they're thinking twice anything above $1000.

And we also heard that they're not refinancing for big renovations from Lowe's or Home Depot.

It seems like we're gonna be staring down like a private label war we were.

We were speaking with TD Cowan's Oliver Chen earlier today, who said Macy's also needs to get its private label right?

Is there a private label that's really outperforming from your perspective right now, uh, walmart and, um, Target.

And then it's not a private label, but consumers still want designer for less.

And that's where the off price, uh, retailers like Ross and TJ ox are.

They didn't only do well for the second quarter, but are projected to continue to be the winners for the second half of the year.

You didn't say Kirkland.

That's interesting Here.

All right, we're gonna have to continue this conversation.

Jerome Martis LSCG, director of consumer research.

Great to see you.

Good to be here.