Retail Stocks Rebound But ‘Feast-Or-Famine Environment’ May Persist Amid Shift In Consumer Spending, Experts Warn

Topline

Retail has been hit hard by a selloff over recent weeks, despite warnings from major corporations that rising inflation has had an impact on profits. Experts predict more challenges as it becomes harder to predict consumer spending.

Key facts

Reuters reports that Kohl’s is preparing to compete for takeover bids from multiple bidders helped retail and consumer stocks rebound. Investors are also glimmer in Nordstrom’s strong quarter and the news that it has raised its full-year sales outlook.

Despite the retail sector being “decimated” during earnings season, both positive headlines helped “spark buying for the first time since weeks,” Vital Knowledge founder Adam Crisafulli says. He points out trading activity around Dick’s Sporting Goods, whose shares

fell approximately 10%, before turning positive and moving 10% higher.

The SPDR S&P Retail ETF gained 6% Wednesday but is still down almost 20% this month

due to several significant earnings misses by large companies.

Target and Walmart were among the large retailers that reported poor earnings last week—warned of inflationary pressures affecting profits. This caused a sharp decline in stocks and raised concerns about a recession.

Wall Street analysts observe a shift in consumer spending from goods to services, which has impacted results. This is especially true since companies that dealt with supply chain issues last year ended up with excessive stocking and now face extensive inventories.

Crisafulli says that companies are cutting back on spending and hiring while consumers rein in their spending. “Retailers are sitting on an awful inventory that will need flushing,” Crisafulli states.

Important Quote:

Retailers who have relied on Americans being predictable in their shopping habits will face a challenge as the pace of consumer demand change is fast and challenging to predict, according to Andy Kapyrin, chief investment officer at RegentAtlantic. He warns that retailers will be “in a feast or famine environment over the next few quarters” because consumer behavior is “much less predictable.”

What to Watch Out For:

Katie Nixon, chief investment officer at Northern Trust Wealth Management, says that the pivot in consumer spending from services to goods left major retailers with oversupply and inflationary pressures. However, she points out that overall, consumers are still healthy, with trends in restaurant and travel bookings reaching pandemic levels. However, not all retail earnings are bad. Nordstrom reported on Wednesday that they had posted solid quarterly earnings.

Retail has been hit hard by a selloff over recent weeks, despite warnings from major corporations that rising inflation has had an impact on profits. Experts predict more challenges as it becomes harder to predict consumer spending.

Key facts

Reuters reports that Kohl’s is preparing to compete for takeover bids from multiple bidders helped retail and consumer stocks rebound. Investors are also glimmer in Nordstrom’s strong quarter and the news that it has raised its full-year sales outlook.

Despite the retail sector being “decimated” during earnings season, both positive headlines helped “spark buying for the first time since weeks,” Vital Knowledge founder Adam Crisafulli says. He points out trading activity around Dick’s Sporting Goods, whose shares fell approximately 10%, before turning positive and moving 10% higher.

The SPDR S&P Retail ETF gained 6% Wednesday but is still down almost 20% this month due to several significant earnings misses by large companies.

Target and Walmart were among the large retailers that reported poor earnings last week—warned of inflationary pressures affecting profits. This caused a sharp decline in stocks and raised concerns about a recession.

Wall Street analysts observe a shift in consumer spending from goods to services, which has impacted results. This is especially true since companies that deal with supply chain issues last years ended up with excessive stocking and now face large inventories.

Crisafulli says that companies are cutting back on spending and hiring, while consumers rein in their spending. “Retailers are sitting on an awful amount of inventory that will need flushed,” Crisafulli states.

Important Quote:

Retailers who have relied on Americans being predictable in their shopping habits will face a challenge as the pace of consumer demand change is fast and difficult to predict, according to Andy Kapyrin chief investment officer at RegentAtlantic. He warns that retailers will be “in a feast or famine environment over the next few quarters” because consumer behavior is “much less predictable.”

What to Watch Out For:

Katie Nixon, chief investment officer at Northern Trust Wealth Management, says that the pivot in consumer spending from services to goods left major retailers with oversupply and inflationary pressures. However, she points out that overall consumers are still healthy, with trends in restaurant and travel bookings reaching preandemic levels. However, not all retail earnings are bad. Nordstrom reported on Wednesday that they had posted solid quarterly earnings.

- Advertisement -
Robert Scoble
Robert is the assistant managing editor for HC News, overseeing coverage of markets, companies, strategy and business leaders. Originally from Boston, Scoble began his journalism career in 1997 & now resides outside New York.

Latest articles

Related articles

Leave a reply

Please enter your comment!
Please enter your name here