Walmart and Target earnings marked a sudden swing in sentiment around the retail industry this year. After a boom year of 2021 — which saw sales increases and fat profit margins for many retailers even amid rising supply chain costs — customers are starting to make hard decisions on purchases. 

Sharp spikes in gas and food prices led to pullbacks in discretionary spending on some general merchandise categories, which hurt Walmart’s category mix and led Target to mark down items so it could refresh stores. 

Middle- and lower-income shoppers are feeling the pain of inflation. That is threatening sales levels for those who operate in discretionary categories even as their own freight and labor costs are rising. 

In this episode of The Backroom, Ben Unglesbee and Daphne Howland discuss what’s going on with the consumer right now and it means for retailers big and small.

Resource links:

• Walmart’s profits take a hit as fuel spikes and consumers react to inflation
• Target’s profit ‘collapsed’ in Q1 as retail smashes into fuel costs
• Consumers were undeterred in April, sending retail sales up over 11%
• Inflation finally slowed online in April but remained ‘punishingly high’ overall