...Pressure is increasing on middle- and lower-income consumers. Per reports from dollar stores, consumers are shifting spending to food from discretionary categories. Even high- income consumers are adopting budget-conscious shopping behaviors. Luxury retailers reported a sequential monthly deterioration in sales in the first quarter. Consumers trading down favors some retailers. Off-price and discounters will attract cautious consumers, and retailers that carry basics like groceries are better positioned than those that carry only discretionary categories. Walmart benefits on both fronts. Bargain hunting pressures all retailers to compete on price, forcing promotional activity. Unless cost structures are designed for lower prices, margins will contract, especially for retailers like department stores and specialty apparel. Elevated costs and residual supply chain snags continue to strain some retailers. Although shipping, freight, and other costs have moderated or declined, labor costs remain...
