What’s News in Earnings: How Retailers Are Dealing With Price-Conscious Shoppers

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Hey listeners, it's Friday, March 20th. I'm Alex O'Sola for the Wall Street Journal.

And this is what's news and earnings. Our look at some of the biggest themes

standing out this earnings season. The holiday quarter is the most important time of year

for U.S. retailers. And despite worries about inflation and the job market,

consumer spending largely held up. We'll look at a range of retailers to see patterns in how

Americans are spending from Walmart to Discounters to Macy's. One of the last traditional

department stores which just reported surprisingly strong results. Some companies are navigating

changes in consumer shopping habits better than others. But many of them face the same uncertainties.

There's government policy on tariffs that keeps changing which affects their costs.

And the Iran War is threatening to send inflation even higher.

Joining me to break down what all this means for the retail industry is WSJ reporter

Kelly Clunin. Welcome, Kelly. Thanks for having me.

Kelly, Walmart posted strong sales growth in its most recent quarter. But it also lost its

crown as the country's largest company by revenue to Amazon. How are Walmart and other retailers

trying to keep up in the e-commerce space? Yeah, totally. For quite a while now, Amazon has been

winning business from other retailers with its quick shipping options. This week it even said that

it's rolling out one hour and three hour delivery services across the U.S.

Such compete. I think a lot of retailers are really just looking to up their own delivery times.

Target, which has been struggling with sluggish sales for several years now,

said earlier this month that it plans to launch next day delivery in more than 20 new

mature areas. And then Walmart has also been expanding its own same day delivery service in

recent years. Right. Walmart CEO John Furner mentioned the growth of its fast delivery option

in Walmart's latest earnings call. The investments we've made in technology and supply chain

help us deliver items even faster. They're paying off. Here in the U.S., customers using fast

delivery, and that's delivery in under three hours, grew more than 60% for the year.

You just heard Walmart talk a little bit about the investments that they've made in technology

and in automation. And it's also said that those efforts have helped to cut down on labor costs.

And Walmart also has been working on its own AI shopping assistant called Sparky,

which it said has helped boost average order values. Shifting a little bit gas prices have been

soaring because of the war in the Middle East. But even before that, people were pretty worried

about inflation. What do the stores have to say? Yeah, inflation has definitely been a major theme

across industry for a while now. And even as consumers seem to remain resilient and

continue spending, their wallets had definitely come under pressure as inflation just remains

stubbornly high. Some retailers have noted though that inflation for some products has come down

recently, which has helped lower prices a bit. Costco, for example, said it has already lowered

the cost of some products like eggs, cheese, coffee, because of lower inflation for those things.

It's also said that if it gets tear of refunds after the Supreme Court struck down Trump's

tariffs last month, that it would then pass on those lower prices to shoppers. I think Costco's

a really interesting case because it also, you know, got sued by a customer who won refunds on

on items because of the tariffs. The lawsuit basically wants to force Costco to pass along any

refunds it might get from the government to customers. But it really is still a huge question

mark of when or if any of these companies will get refunds from the government and how that would

flow through in the form of lower prices or refunds to customers. So Kelly, we know

people are worried about prices. They have been for a while. What kinds of retailers are benefiting

from that? Yeah, a lot of stores have been talking about this kind of case shaped economy where

lower-income consumers are having a harder time. They're sort of trading down or remain on the

hunt for value while hiring some shoppers generally seem to be doing pretty well and they continue

to spend. That dynamic needs a couple of things. For one, off-price retailers like TJX, which owns

TJ Maxx and Marshalls, raw stores, and Burlington all had pretty solid quarters as people

looked for value. Raw said that it's customer-based, has grown, adding new shoppers from a range

of income levels in the ages. And it's CEO even said that off-price retailers in general are

gaining market share for more mainstream retailers, including department stores.

But at the same time, other retailers have really put into strength from higher-income consumers,

including Macy's, which reported earnings earlier this week. Macy said its customers tend to have

higher incomes and, you know, generally have been more resilient than lower-income shoppers,

which helped boost sales at its Bloomingdale's brand, which, you know, tends to have more

luxury products. That was Wall Street Journal reporter Kelly Kloonin. Kelly, thanks so much for

joining us. Thanks for having me. And that was What's News in Earnings. Today's show is produced

by Pierre Bienname, with supervising producer Tally Arbel, additional sound courtesy of S&P Global

Market Intelligence. Later today, we'll have the PM edition of What's News out for you as usual,

and we'll be back with you next earnings season, looking at more reports from major U.S. companies.

Until then, I'm Alex Osula. Have a great day!

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