Following the warning from ex-Walmart CEO Bill Simon regarding the American consumer nearing a ‘breaking point,’ Target’s CEO, Brian Cornell, has also signaled a cutback in consumer spending, groceries included. This trend aligns with our view, as well as views from JPMorgan and Goldman, that consumers have hit a wall.
On Thursday morning, Cornell spoke with CNBC’s Becky Quick on ‘Squawk Box’ about the retailer’s challenges, including the cash crunch facing consumers amid high inflation. He provides a unique insight into consumer behavior patterns at stores nationwide:
“They’re managing that budget really carefully, and it certainly is pressuring discretionary spending,” Cornell said.
The exec continued: “They’re purchasing fewer items, even within the food and beverage sector. When we examine overall retail spending and observe the top line, it appears there’s a really healthy consumer out there spending money. But, even in the food and beverage categories, over the last few quarters, we’ve seen a decline in the units, the number of items they’re buying.”
“So, they’re even tightening up their spending in those categories. In discretionary goods, we have seen seven consecutive quarters of decline in both dollars and units. This means consumers are buying less apparel, fewer items for their home, and fewer toys,” he said.