LIVE MARKETS-Consumers vote for value

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CONSUMERS VOTE FOR VALUE

With inflation still elevated, Jharonne Martis, director of consumer research at LSEG, writes that consumers have adjusted spending habits.

While LSEG's same-store sales (SSS) data shows premium brands outperforming, Martis said, in a report issued earlier this week, that "retailers serving middle- and lower-income consumers are seeing more muted results."

For example, Martis says Ralph Lauren RL.N has consistently boasted robust SSS growth well above 3.0% for the past two years, "underscoring how luxury, innovation, and brand strength continue to resonate with high-end consumers." According to some analysts, it also helps that Taylor Swift likes the brand.

But in comparison, mass-market retailers such as Macy’s M.N, Target TGT.N, and Dollar General DG.N have been underperforming, "reflecting ongoing consumer caution and a shift toward value among lower-income segments."

And recently, Martis writes "value-seeking remains strong, even among higher-income groups."

She notes that many shoppers are "trading down" to retailers like Walmart WMT.N or off-price retailers, due to persistent inflation, rising tariffs and economic uncertainty.

Rate cuts - expected in September - might ease anxiety, but Martis says that "they’re unlikely to fully reverse cautious spending habits" with consumers "highly price-sensitive and focused on bargains." If wage growth stays modest and cost pressures persist she sees the trend continuing.

And Walmart’s last earnings call highlighted the price dynamic. As the retailer replenishes inventory with prices that include the new tariffs, Martis notes that it has seen weekly cost increases, which is "an upward trend expected to continue through Q3 and Q4." While she says Walmart is absorbing costs when possible it is raising prices on some items.

Martis goes so far as to say that "value has become a central driver of purchasing behavior" with shoppers across all income levels "increasingly focused on affordability."

This is good news however, for value-oriented retailers with Martis finding analysts polled by LSEG bullish on discounters and off-price retailers including Costco COST.O , Walmart, TJX TJX.N and Ross Stores ROST.O.

(Sinéad Carew)

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