Economy
14 August 2022
The Week Ahead: US retail sales, Walmart and Target earnings
The week of August 15-19 should provide lots of insights about the American consumer.
(Illustration by The Current)
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Welcome to a new week. Ecommerce-focused professional events are in another state of summer lull after eTail gathered in Boston last week. Still, there will be plenty of news that offers a look at the shape of the industry and consumer behavior right now. Here’s a look at the schedule for earnings and indicators:
Economic indicators
The first week of the month put a focus on jobs, while last week spotlighted prices through inflation. This week, consumer spending steps into the ring. Federal agencies will be releasing the following data:
- Total retail sales for July will be reported on Wednesday. This measure of consumer spending has remained steady, despite rising prices due to inflation. August 17
- Retail inventories will be reported on Wednesday. This metric has been closely watched as retailers have sought to work through a glut of inventory that resulted from supply chain bottlenecks and demand mismatch with the return to in-person activities. August 17
- Ecommerce sales for the second quarter will be reported on Friday. Over the last quarter, a variety of analysts have released predictions that ecommerce sales will reach over $1 trillion in 2022. This release will provide a look at progress toward that milestone halfway through the year. August 19
Earnings
Second quarter earnings season is beginning to round into the home stretch. But before we get to the finish line, a group of the nation’s largest retailers will issue their results, providing a look at consumer and economic trends in the process.
- Tuesday, August 18: Walmart, Home Depot
- Wednesday, August 19: Target, Lowe’s, TJX, Bath & Body Works
- Thursday, August 20: Estee Lauder Companies, Tapestry, Inc., Kohl’s, SpartanNash
5 questions we're asking
Here’s a look at some of the key questions we’ll be looking to answer as we dig through these reports:
- What’s the state of the consumer? Retail sales and earnings will offer important signs about whether consumers are shifting how they spend as a result of inflation, and what they are spending money on right now. In a pre-emptive announcement to cut its profit outlook issued last month, Walmart said it saw consumers spending more on food and fuel, and less on more profitable categories like apparel and home goods. We’ll look for more details about how shoppers are making decisions.
- Are inventories starting to move? Entering the second quarter, retailers said one of their major initiatives involved marking down items and even canceling orders to move through the glut of inventory. Target already made its own move to cut its profit outlook as a result of this. Earnings reports will offer an update on progress.
- Was the ecommerce dip just a blip? Recent ecommerce-focused results have pointed to softening sales as a result of a return to in-store shopping. So far this quarter, the large platforms like Amazon, Shopify and Etsy have reported mixed results. What’s the view from the largest retailers, which double as some of the biggest ecommerce platforms? We’ll learn a lot this week.
- How are private label brands faring? In times when wallets are tighter, consumers often opt for store brands to save. Walmart and Target have some of the largest private label operations, so they should have insights on whether there is widespread switching, or trading down.
- Did home and garden bounce back? Among categories that rose in the pandemic, home and garden had one of the sharpest dips following a return to more in-person events and experiences taking place outside of the home. But the arrival of summer (think: Patio, grilling, house projects) may have led this to tick back up in the quarter that ended in June. Walmart, Target, Home Depot and Lowe's all have earnings this week. That should tell us a lot about how this important consumer category is faring.
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Marketing
09 June
'There's a lot of ways to frame value'
Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
Photo by Kelly Common on Unsplash
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.
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