Retailers are facing a challenging period as the American economy slowly recovers from the pandemic. On February 21st, Walmart and Home Depot reported their quarterly earnings and both companies forecast weaker sales growth for the rest of the year. Walmart reported a higher-than-expected 8.3% increase in comparable sales in America, but the higher-margin discretionary items such as toys, clothes and homeware did not do as well. Home Depot reported its seventh successive year-on-year decline in transaction volumes and its share price fell by more than 7%.
The higher-than-usual consumer spending seen in 2021 has been supported by 517,000 new jobs and inflation-linked social-security payments, but this is likely to slow down as jitters in the housing market take their toll. Furthermore, the retailers are facing the challenge of increasing wages for their workers, which is estimated to cost Walmart and Home Depot around $1bn each. With households having already spent a third of their excess savings and prices on the rise, it is likely that consumers, even the well-heeled, will become more cautious with their spending.