Tipping point

Slipping out on the wires this week, to apparent little fanfare, was the Redbook retail sales data which depicted an alarming image of a go-slow consumer. In the context of US GDP, this matters. The consumer, once flush with pandemic savings and a lust for life, is starting to feel the pinch. This would echo what many consumer facing companies muttered about as they mooched through their recent quarterly updates. Take Monro Inc – an automotive repair chain – who said that customers no longer cared so much about a tyre that looked good, they wanted one cheap, with entry level tyres making up a bigger proportion of sales. And it’s not just down the garage. Foot Locker rattled the cage with a near 10% decline in same-store sales. Guidance got smoked. Sales trends had slowed ‘significantly‘ said management, with eyebrows on sticks. The suggestion is that inflation is suffocating spending. Yes, the inflation print this week showed a slowing trend, but prices are still going up. Gas, food, rents – they’re all elevated. Accumulated inflation bites. Dollar Tree discussed the stress it’s placing on wide-eyed customers who simply have fewer spare dollars around, and those same dollars don’t buy as much as they once did. And it’s the lower-end wage earner that feels it the most. Big Lots – purveyor of furniture and home décor out of Columbus, Ohio – printed a buttock clenching 18% chop in sales. Earnings per share went negative, and negative in size. The market cap got smoked to $150m. Back in 2021 it was not-too-shoddy $2bn, a time when the company thought it wise to buy back $600m of stock. Oh boy. ‘Buyback regret’ is unlikely to be confined to those slumped on a sofa in Ohio. With all the inflation that is now bedded in, the consumer increasingly appears washed out, unable to live like they once did. Expect the go-slow consumer to get a few more headlines through the coming months. Tipping point has been reached.