Retail sales edged higher in April, up 0.4% from last month, according to data from the Department of Commerce. While this is an increase from the revised 0.7% decline in March, the figure was below analysts forecasts of 0.8%. On an annual basis, retail spending grew 1.6% in April, marking the weakest year-over-year increase since the early days of the pandemic.
Big retail names like Walmart (WMT) – Get Free Report and Target (TGT) – Get Free Report saw weaker discretionary spending in the quarter as customers opted for necessities. Shoppers spent more money on things like groceries and everyday items, while spending on items like clothing and electronics decreased. Looking ahead, many economists expect the retail picture to be pretty gloomy. “As far as the individual consumer and retail customer, I would just say expect a bumpy road for the rest of 2023 and don’t let that surprise you,” said Rebecca Walser president of Walser Wealth Management.
Full Video Transcript Below:
J.D. DURKIN: So let’s talk retail sales. We saw that figure for April bounce up 0.4% on the month, up 1.6% on the year. Rebecca, what do you make of that figure and how does it stack up against what we’ve been seeing from some of the major retailers that have been reporting so far this week?
REBECCA WALSER: It obviously missed consensus, as you know. And, you know, I think that when we had the downgraded, revised downgraded number from March, that we actually see that okay, we still do have some problems. When you look at the year over year inflation numbers and you compare that to the retail sales numbers and the fact that it was a general consensus miss by almost half, look at it as a cautionary tale, although Walmart to the upside today maybe. But I look at Walmart as a bellwether of recession. Right like that’s the recession store. They have a beta of 0.48, and if you look at like Target, which we’re also going to talk about, their beta is over one. So you can see the difference in the two companies and how they react during recessionary times. People go to Walmart. Obviously, Walmart being strong today on grocery items, and really soft in electronics and home goods.
J.D. DURKIN: So what does that tell you about the resiliency, so to speak, of the consumer? We certainly know what the stated goals are for Chairman Powell and his colleagues at the central bank. Unfortunately for the Fed, we know that the consumer has continued to spend. What does the data tell you, especially when you look at a company like Walmart?
REBECCA WALSER: You know, you said it in a nutshell. It is a complete mixed bag. We have some beats and we have a Walmart that’s doing very well, actually raised their forward guidance because they do see that they’ll do well this year. But yet at the same time, exactly the same thing. They’re seeing that they’re strong on the grocery side where people have to those are what we call durables, staples. We have to have the staple item to live, but we’re not buying the electronics. But you see a bifurcation because you still see a lot of money going into services, a lot of into travel, although we’ll get those numbers later. But we still see a bifurcated market between the haves and the have nots. And the haves are still really spending. And that is making Powell very frustrated because he’s like, what’s going on? We really do have a bifurcated market.
J.D. DURKIN: Finally, Rebecca, in terms of this overall retail conversation, is there anything you think is really important that maybe does not get frequently discussed enough that you would want a viewer of this interview to take away that you think is really an important priority when we have this conversation?
REBECCA WALSER: As far as the individual, consumer and retail customer, I would just say expect a bumpy road for the rest of 2023 and don’t let that surprise you. So if you see that gas drops down a little bit and you think that maybe I should go fill up some extra tanks, that’s not a bad idea. Like we’re filling our national reserves at like 5x or 4x cost that we could have done just a couple of years ago. So inflation does and has had an impact. And that, you think about it, we’ve got 60% of our population that hasn’t really lived through an inflationary period and doesn’t understand what that really looks like. So I think people just need to be prepared that things are changing. Things are a little bit different than what they’ve seen their whole lifetimes, and it’s time to be in the know of what’s happening.