Q3 Retail Earnings Show Mixed Bag Of Consumer Spending

Consumer spending shows mixed demand as the holiday shopping season gets underway, The Wall Street Journal (WSJ) reported on Tuesday (Nov. 19).

Weak sales at big box shops like Kohl’s and Home Depot were countered by a strong showing by discount chains TJ Maxx and Home Goods. Walmart, the largest retailer in the U.S., showed strong foot traffic.

“The winners keep winning and the losers keep losing,” Jefferies Group analyst Randal Konik told WSJ.

TJ Maxx and HomeGoods showed a 4 percent increase in sales in the quarter that closed Nov. 2 and upped profit forecasts through the end of 2019. Conversely, Home Depot posted lower quarterly sales that missed Wall Street expectations, prompting it to lower year-end forecasts.

Charles Grom, with Gordon Haskett Research Advisors, said Home Depot has seen more foot traffic and big-ticket sales despite sluggish spending in the latest quarter.

“Those are things that would lead you to believe that we are not heading into a consumer pullback,” he said.

Sales at Kohl’s were off 19.49 percent, prompting the chain to lower its profit forecast for the rest of the year. Struggling chain J.C. Penney dropped 0.94 percent, and Sears continued to shutter stores. 

Kohl’s chief executive Michelle Gass said a strong August was offset by a weaker September, but October’s foot traffic bounced back due to increased discounts, which negatively affected profit margins.

“We’re going to make the short-term investment in pricing and promotion as we need to,” Gass told WSJ, noting the retailer wanted to “capture these customers” and get them enrolled in Kohl’s loyalty program. She added that the store is poised for a robust holiday shopping season.

Overall retail sales were slightly up in October, helped by low unemployment and higher wages, according to the U.S. Commerce Department’s report Friday (Nov. 15). Consumer spending was up an annualized rate of 2.9 percent in the third quarter and accounts for almost 67 percent of U.S. economic output.