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The outlook for consumer demand has not improved.

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Last week, we highlighted the deceleration in retail sales and companies reporting a slowdown in consumer demand. In the current environment, where the trend in macro data has been negative, it’s important to also take a micro approach by looking at what individual businesses are experiencing and guiding towards. Over the next few weeks, we will be monitoring earnings calls for outlooks on growth, profitability, and the overall consumer demand setup.

For its fiscal quarter ending April 30th, Wal-Mart reported revenue growth of 7.6% y/y, in a period where the average headline Consumer Price Index was north of 5.0%. Executives at Wal-Mart noted ongoing pressure from an unfavorable category sales mix as the primary driver of the margin compression in the quarter. General merchandise sales declined by mid-single digits and the lower-margin food category increased by low double digits. They expect to see this sales mix dynamic weigh on gross margins through the rest of its fiscal year. On the consumer side, they reported customers remain choiceful, particularly in discretionary categories. Additionally, they have been gaining share in grocery as higher income households increasingly prioritize value and convenience. Wal-Mart raised revenue guidance to 3.5% y/y growth for its fiscal year 2024, down compared to the 6.7% y/y growth in the prior year. They expect adjusted EPS to be in a range of $6.10 to $6.20, which would be a y/y deceleration between -1.4% and -3.0%.

From our perspective, this is an example of top-line growth held up primarily by inflation in foods, a deceleration in margins, and a shift to discount items as consumer demand weakens, even among higher-income households.

For an overview, the bullets below provide company highlights across revenues, earnings, and consumer outlooks.


  • TJ Maxx
    • Revenue growth of 3.3% y/y, down from 4.8% in the prior period
    • Diluted EPS of $0.76, up from $0.49 last year, but decelerated q/q
    • “…what we’re seeing in the first quarter is what we were seeing similar to the first quarter of last year. So through the first 3 quarters of last year, as we said, we were seeing stores in higher [income] demographic areas being more of the driver of our comp.” – Ernie Herrman
  • Ross Stores
    • Revenue growth of 3.7% y/y, down from 3.9%
    • Diluted EPS of $1.09, up from $0.97, but decelerated q/q
    • “…prolonged inflationary pressures negatively impacting our customers’ discretionary spend, shoppers are seeking even stronger values when visiting our stores.” – Adam Orvos
  • Kohl’s
    • Revenue growth of -7.4% y/y, down from -7.0%
    • Diluted EPS of $0.13, up from $0.11, and accelerated q/q
    • “…the middle-income customer is being squeezed overall based on, obviously, macroeconomic issues…” – Thomas Kingsbury


  • AutoZone
    • Revenue growth of 5.8% y/y, down from 9.5%
    • Diluted EPS of $27.45, up from $25.69, but decelerated q/q
    • “…growth initiatives and macro car park tailwinds have driven a positive comp despite consumer discretionary spending pressure from overall inflation in the economy. We are forecasting a resilient DIY business for the remainder of 2023.” – Jamere Jackson

Home Improvement:

  • Lowe’s
    • Revenue growth of -5.6% y/y, down from 5.2%
    • Diluted EPS of $3.77, up from $3.51, and accelerated q/q
    • “…we are expecting a pullback in discretionary consumer spending over the near term.” – Marvin Ellison


  • Dick’s Sporting Goods
    • Revenue growth of 5.3% y/y, down from 7.3%
    • Diluted EPS of $3.40, up from $2.47, and accelerated q/q
    • “Overall, we really feel very good about how our consumer is holding up.” – Lauren Hobart
  • Williams-Sonoma
    • Revenue growth of -7.2% y/y, down from -1.9%
    • Diluted EPS of $2.35, down from $3.50, and decelerated q/q
    • “We recognize there is uncertainty in the macro and the consumer is becoming increasingly cautious…” – Jeff Howie
  • Urban Outfitters
    • Revenue growth of 5.9% y/y, up from 3.9%
    • Diluted EPS of $0.56, up from $0.33, and accelerated q/q
    • “We currently see no signs of change in customer behavior. No indication that customers are shopping less frequently, buying fewer items or trading down.” – Richard Hayne
  • V.F. Corporation
    • Revenue growth of -3.0% y/y, down from -2.6%
    • Diluted EPS -$0.14, down from $0.39, and decelerated q/q
    • “…we are starting to see some impact from macro pressures on consumer spending…” – Matt Puckett
  • Foot Locker
    • Revenue growth of -11.2%, down from -0.6%
    • Diluted EPS of $0.38, down from $1.37, and decelerated q/q
    • “…following a much better-than-expected holiday season, we’ve seen the consumer retrench as they continue to face pressure from rapid inflation, which we see squeezing their ability to spend on discretionary items, including athletic footwear.” – Mary Dillon

Source: Koyfin.

Lastly, a quick note on guidance, which was particularly weak for a few companies. Kohl’s is expecting net sales for the current fiscal year to fall between -2% and -4%. Williams-Sonoma reported revenue guidance of -3% and 3% for the year. Foot Locker lowered guidance on EPS growth to a range of -7.5% and -9.0%. Lowe’s reduced its full-year sales target and said it now expects adjusted EPS to be between $13.20 and $13.60, compared to prior guidance of $13.60 and $14.00.

When reviewing the data of individual companies, it’s important to remember there will always be a handful of brands/concepts that work well at different points in time, diverging from macro trends. We are trying to capture the trends broadly with this form of analysis. Overall, revenues mostly decelerated sequentially and are well below the growth rates seen in the first half of 2022. Earnings have held up so far, but the outlook for consumer demand is mostly negative.

With more earnings calls to come, we will continue to monitor the trends in revenues, earnings, and consumer demand.


The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance.  The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.