Target CEO Brian Cornell recently spoke about the financial pressures consumers are facing and how it has led to a decrease in spending. While overall retail spending appears healthy, there has been a decline in the number of items purchased within the food and beverage categories.
According to Cornell, Target has experienced seven consecutive quarters of declining consumer spending. This decline is evident in both the dollar amount and the number of units sold, particularly in discretionary goods like clothing and toys. The reduced spending is indicative of individuals purchasing fewer apparel, home items, and toys.
Consumers are now being more cautious with their budgets, as they manage their finances carefully. Not only are they spending less than before, but they are also making different purchase choices compared to the pandemic period.
Despite high inflation and interest rates, consumer spending remains strong, with a 4% increase from July to September. This has contributed to a significant rise in the country's gross domestic product. However, economists are questioning the sustainability of this level of spending since households are relying on their savings, while real wage growth is declining.
It is worth noting that Walmart and Target will soon report their earnings for the third quarter, offering further insights into consumer behavior. In the second quarter, Walmart's CEO noted that consumers were gravitating towards store brands and more affordable items. Additionally, Walmart attributed a decline in demand for certain food items to the popularity of the weight loss drug Ozempic.
Both Walmart and Target have not provided immediate comments on these trends.