Price Hikes No Longer ‘Badge of Honor’ in Cooling Economy

Prices are finally coming down at many retailers. Consumers still may not feel relieved.

A report Thursday (Nov. 16) by The Wall Street Journal (WSJ) takes a closer look at the state of the American shopper one week out from Black Friday.

As the report pointed out, shoppers have spent the last year cutting back on discretionary spending as the price of essential items have risen. Some retailers now say inflation has eased in a number of categories, something that could crimp sales growth.

The WSJ pointed to a number of retailers that have reduced prices — such as Levi’s — and promoted price cuts and discounts in their marketing.

“We know our customer is looking for value, so we have simplified our promotions,” Macy’s current CEO, Jeff Gennette, said on Thursday, per the WSJ.

That’s because with the economy cooling and consumers feeling pressured, “the days of proudly talking about price increases are behind us,” Simeon Siegel, an analyst with BMO Capital Markets, told the WSJ. “It’s no longer the badge of honor it once was.”

The report also checked in with Walmart, which — as noted here — “made the consumer spending slowdown official” when it released its earnings Thursday, sounding a cautious note.

Chief Financial Officer John David Rainey said in an interview with the Journal that the company saw a marked slowdown in spending in the last two weeks of October. 

Had the quarter wrapped before those weeks of slower sales, “you probably wouldn’t have heard that tone from us,” Rainey said. 

This week also saw Target report earnings that showed the ongoing challenges facing consumers. The company said its shoppers were feeling financial strain, leading the retailer to adopt a cautious near-term outlook.

“There’s tremendous pressure on the consumer’s wallet and the impact of very sticky food and beverage inflation, which compared to pre-pandemic. Food and Beverage prices are up on average 25%,” COO John Mulligan said. “And that certainly pressured consumers as they’re making choices and certainly has forced them to make very tough choices when it comes to discretionary goods.”

Recent PYMNTS reporting has spotlighted the way the holiday season — typically thought of as a time of celebration — can often generate significant financial stress for many consumers, especially those who live paycheck to paycheck.

The recent PYMNTS Intelligence report, “New Reality Check: The Paycheck-to-Paycheck Report,” which examines the influence of seasonal spending on consumer finance, found that 55% of individuals experiencing fluctuations in their finances attribute financial distress to events and celebrations. 

And notably, November and December were listed as the periods that produce the highest levels of financial anxiety.

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