The State of the Consumer: From Resilient to Choiceful to Stressed and Cautious?
In terms of consumer behavior, we have seen all the adjectives. People are parsing the words of major retailer/brand CEOs like they were coming from the Chairman of the Federal Reserve.
If there is one CEO I pay attention to more than most, it's Walmart. Walmart - although a discount/EDLP retailer, more defines where mainstream America is than almost anyone else... not to mention, over half of its new growth is coming from more affluent customers.
The company is reporting lower pack sizes, and consumers running out of money by the end of the month. The cause is put on stubbornly high food prices. Given the state of the relationships between America's neighbors who incidentally produce a significant number of agricultural imports to the United States, it seems this trend is unlikely to stop anytime soon.
Lululemon's CEO is reporting similarly stressed consumer behavior in a recent report - while AOV and conversion rate seem strong, traffic is off due to concerns about inflation and the economy. My read on it is a little different, it seems to me that Lulu is almost becoming a luxury symbol and other brands like alo and aerie are become more "everyday staples". Lulu could become just for the statement pieces.
Regardless, I just wanted to pass along these two datapoints because it feels eerily like the last time we started talking about inflation. And now we sit on the precipice of April 2 -- the effects of which are likely to have definite impacts on pricing.
Frankly, I think job security is another factor at play here too. If you are in the federal government or education, it can seem like you are a target. In a high-tech field, another target due to AI. Across the economy, you might be a target due to the "Elonification" of corporate America -- the belief that more must be done with less.
Uncertainty is not great for consumer confidence and behavior, which could signal a very different 2025 than we were expecting just 3 months ago. Let's see if any more tea leaves continue to appear.
