Retailers see slow spending across all income levels|Sarl Sofamar|CC BY-SA 4.0
US consumers, both rich and poor, are pulling back on spending, even on necessities, according to the Wall Street Journal. The phenomenon coincides with fresh fears of a recession after major businesses reported lackluster performance.
Retailers have noticed that buyers are cash-strapped. Dollar General reported a 4.5% increase in net sales for the fourth quarter but faced a significant decline in operating profit, which decreased by 49.2% in Q4 and 29.9% for the fiscal year.
While speaking to investors yesterday, the discount retailer’s CEO Todd Vasos said that their customers’ “financial situation has worsened over the last year, as they have been negatively impacted by ongoing inflation.” He further added that the store’s consumers “report they only have enough money for basic essentials,” with food-stamp cuts worsening the situation.
- Walmart witnessed a similar pattern among low-income consumers and reported buyers purchase smaller packs at month’s end as money runs out.
- Retailers including Target, Lowe’s and Foot Locker also saw weak demand last month, the WSJ reported.
- Costco customers are opting for cheaper proteins like ground beef.
- McDonald’s says fast-food sales to low-income consumers dropped by double digits in the fourth quarter.
Even wealthier consumers are tightening budgets. Luxury spending dropped 9.3% in February, worse than January’s 5.9% decline, according to Citi data.
Retail sales are down. According to Citi’s credit card data, apparel spending fell 12%, while athletic footwear dropped 22%. Kohl’s, Dick’s and Macy’s saw a slowdown in spending across all income levels, with Kohl’s stock plunging 24% after a weak forecast.
Airlines, including Delta and JetBlue, have lowered revenue forecasts as travel demand weakens. With declining savings and rising debt, consumers have little room to absorb economic shocks, raising risks of a broader slowdown. Weather and recent plane crashes have also played a role in declining ticket sales.
With rising economic uncertainty due to President Donald Trump’s tariffs, consumers are tightening their budgets, which could slow overall economic growth.