Target, Macy’s and Best Buy see consumers cut back, search for discounts

By Nathaniel Meyersohn, CNN

Big retailers say consumer demand is starting to buckle from the strain of inflation and customers are making changes in how they shop.

Target, Best Buy, Macy’s and other chains say shoppers have pulled back on discretionary goods like clothing, electronics and home improvement. They have shifted their spending to paying for groceries and household basics.

“Spiraling inflation forced families to put discretionary purchases on hold and focus most of their spending on necessities,” Target CEO Brian Cornell said this week.

The slowdown could mean consumers will see more discounts on shelves as stores look for ways to entice shoppers and work down their inventory.

The rate of inflation has eased on clothing, for example, while prices have dropped on electronics.

“The promotional environment went a little bit deeper, and we believe it’s going to go a little bit longer,” Under Armour finance chief David Bergman said last month.

Several retailers predict that changes in consumer behavior will lead to a sales decline this year.

“The consumer electronics industry continues to feel the effects of the broader macro environment and its impact on consumers,” Best Buy finance chief Matt Bilunas said. Best Buy predicts its comparable sales will decline 3% to 6% this year.

Some discount chains may benefit from consumers seeking out bargains. TJX, the parent of TJ Maxx and Marshalls, said it expects comparable sales to grow by up to 3% this year. Shopper visits to discount grocers such as Aldi have also increased, according to analytics firm Placer.ai.

The retail sector as a whole faces a more difficult year than the last two.

Bankruptcies are piling up: Party City, Tuesday Morning, mattress manufacturer Serta Simmons and Independent Pet Partners, a pet store retailer, have filed for bankruptcy in recent weeks.

Bed Bath & Beyond, Rite Aid, Joann Fabric and other chains are also on bankruptcy watch, according to credit rating agencies. These companies have struggled for years and are most vulnerable to challenging economic conditions.

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