2/23/2023

Welcome, everyone, to the latest debate. It’s been a big earnings week for some of the most important names in retail. Given some stronger than expected holiday numbers, is the consumer showing signs of strength? Jon Fortt is here to weigh in.

JON:

“Yes, the consumer is holding up pretty well.

Take Walmart's report: Comparable store sales were up 8%, and it wasn't just inflation. The raw number of transactions was up too, 1.8% in the US. CEO Doug McMillon said the consumer is "choiceful, discerning, thoughtful," but "still spending money." And it's not just Walmart. The Johnson Redbook Index of 9,000 large retailers out yesterday rose 5.3%, better than the 4.9 expected. So I know, inflation has been stubborn. Plus, stocks took a dive on Tuesday, and that's got everyone feeling understandably skittish. But we have to take good news when it comes. Like yesterday: TJX, parent company of TJ Maxx, Marshalls and HomeGoods reported a solid quarter as consumers went hunting for bargains. And it's not just at the low end — Etsy was up 6.5% after hours on better than expected sales and profits. If the consumer's got money to spend on Etsy? The consumer's doing OK.”

You had a lot to say about Walmart and TJ Maxx, but you didn't mention Home Depot. Their consumer didn't look to strong.

JON:

“On the other hand, the data in this week's reports really shows a weakening consumer.

Home Depot is a prime example. Home improvement project demand is actually weakening, with do-it-yourself shopping softer than the business from contractors. That matters because contractors have a waiting list of business they've been working through, so it will take longer for a slowdown to show there. And then let's talk about Walmart. A huge reason Walmart did well is its monster business in affordable groceries, which people need with this stubborn inflation. Over at TJX, it's a similar story. The company said it's doing so well because there's been bloated inventory of high-quality brands, which is pulling in consumers who — and this is my commentary — need to pinch pennies after spending so much on groceries. You know what's not doing well at TJX? The HomeGoods business. Probably because with higher interest rates, consumers can't afford to move.”

What do you think? Which side do you find more convincing, and why? Watch how it played out on Squawk Box below: