Americans are expected to spend less this holiday season and seek out discounts, according to a new CNBC survey of retail logistics managers. This desire to save money during a time when most people have to shop would favor TJX Companies ‘ (TJX) off-price brands and Costco ‘s (COST) bargain prices. According to the latest CNBC Supply Chain Survey , released Friday, 71% of the respondents indicated concern that the consumer will cut back on holiday spending in response to inflation. Meanwhile, roughly two-thirds of those surveyed by CNBC expect consumers to look for discounts. Together with an already cost-conscience consumer, the value shoppers can get at TJX-owned T.J. Maxx, Marshalls, and HomeGoods as well as Costco play right into our investment thesis on both stocks in these times of economic uncertainty due to the Federal Reserve’s insistence that troublesome inflation has not yet been vanquished. The Fed on Wednesday paused its string of interest rate hikes but signaled two more were likely this year. Inflation currently remains high even as the trend in recent months has been smaller increases. Softer demand recently for discretionary purchases reflects consumers’ worries about higher prices while they try to prioritize the essentials. For example, Home Depot (HD) expects overall sales and same-store sales to each decline between 2% and 5% in fiscal year 2023. It also forecasted a full-year diluted earnings-per-share (EPS) decline between 7% and 13% as do-it-yourself buyers pull back on home improvement projects. Home Depot, which last month reported its biggest quarterly revenue miss in about 20 years, stuck with its prior full-year guidance at its Investor Day this past week Similarly, Club holding Foot Locker (FL) has also seen a deceleration in consumer spending and elevated inventory levels, leading it to report lower guidance for the rest of the year. Management updated its sales guidance for fiscal 2023 to down 6.5% to down 8% from its prior guidance of down 3.5% to down 5.5% as “consumers are forced to be more choiceful on how they spend their money,” CEO Mary Dillon said during the company’s post-earnings call last month. To be sure, consumers spent more than expected in May as government retail sales results from earlier this week rose 0.3% for the month. That’s higher than the 0.1% estimate. Tuesday’s consumer price index showed a 4% year-over-year increase in May, down from April’s 4.9% and a huge decline from the Covid pandemic peak of 9.1% in June 2022. Even though cooling inflation appeared to have lifted some weight off Americans’ backs last month, retailers are still preparing for a cautious shopper ahead. To accommodate the pressured consumer, Wall Street believes having the right inventory will differentiate successful retailers from the rest of the pack. COST YTD mountain Costco YTD performance Cowen named Costco a best idea for 2023, citing steady traffic trends, record renewal rates and solid membership fee…
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