Retailers Turn to Discounts as Consumers' Cost Concerns Grow

American retailers are increasingly turning to promotions as consumers grow cagey about nonessential spending.

As Bloomberg News noted in a report Sunday (Aug. 27), Whirlpool, Petco and Foot Locker are among the companies offering discounts to entice shoppers.

“With sales softer than anticipated, we are taking more aggressive actions on promotions to drive demand and manage our inventory to ensure we are best positioned for the upcoming holiday season,” Foot Locker Chief Financial Officer Mike Baughn told analysts and investors on a recent earnings call.

Offering deals, the report said, has become a fact of life for retailers as consumers seek out bargains to offset their worsening financial situation.

“People have been expecting promotions to be more isolated to the first half and then lower in the back half of the year,” Telsey Advisory Group analyst Cristina Fernández told Bloomberg. “Now the tone’s different about the back half being a little bit tougher.”

And while these practices might help consumers, investors are seeing things in a different light. For example, Bloomberg noted, Macy’s reported its biggest weekly share decline in three years after its earnings fell due to markdowns to reduce inventory.

As reported by PYMNTS earlier this month, although the cost of essential items might be rising more slowly compared to last year, consumers continue to show caution when shopping. 

The Consumer Price Index data released by the Bureau of Labor Statistics on Aug. 10 showed a slight 0.2% month-over-month price increase. 

All the same, PYMNTS’ July “Consumer Inflation Sentiment Report" showed that among consumers who are even somewhat worried about the economy, the chief source of concern is the increase in prices. 

This sentiment is felt by 83% of the individuals polled, a response rate that is nearly double that of the second most common concern, monthly financial commitments. Higher prices were a concern for 91% of baby boomers and seniors and 73% of bridge millennials.

Meanwhile, off-price retailers like Ross Stores and TJX Companies are benefiting from budget-conscious consumers. 

Barbara Rentler, the CEO of Ross Stores, said earlier this month that while there has been a slowdown in inflation, customers with lower and moderate incomes are still dealing with increased expenses for essential items. 

“Despite the recent moderation in inflation, our low-to-moderate income customer continues to face persistently higher costs on necessities," she said. "As such, we believe it is prudent to continue to plan the business cautiously. However, given our improved second quarter performance, we are raising our second half sales and earnings outlook."

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