Consumers Moving Toward Lower-End Stores, Says Retail Expert

Dana Telsey, CEO and chief research officer of Telsey Advisory Group, breaks down what she's seeing from US consumers as shoppers look for back-to-school deals and contend with the impact of tariffs on prices. Key retailers like Kohls and Abercrombie & Fitch are set to report earnings Wednesday afternoon.

Kohl’s Corp. shares surged after it offered a more optimistic full-year sales outlook, the latest indication that consumer spending hasn’t yet run out of steam.

The company now expects comparable sales to fall no more than 5% this year, an improvement from its prior forecast that sales would decline as much as 6%. The company also reported second-quarter sales that were better than Wall Street estimates.

Retailers continue to point to sales momentum from US shoppers shrugging off worries about tariffs and and inflation. Earlier this month, TJ Maxx owner TJX Cos. and Ross Stores Inc. indicated that Americans are willing to spend, but are looking for cheaper options.

The momentum cuts against signs that Americans continue to worry about the economy. A measure of consumer confidence fell in August on growing concerns about the job market. Unemployment and limited salary increases are contributing to consumer sentiment hovering at levels well below those seen prior to the pandemic.

Abercrombie & Fitch Co. also upped its sales forecast on strong back-to-school demand. Foot Locker Inc., which is being acquired by Dick’s Sporting Goods Inc., reported a 1.4% gain in North America comparable sales in the most recent quarter. The footwear chain’s European and Asia Pacific businesses, meanwhile, saw a 10% drop in sales.

Peanut butter and jelly maker JM Smucker Co. shares fell after it reported that first-quarter net sales were weighed down by decreased sales of coffee, dog snacks, sweet baked goods and fruit spreads.

The owner of the Folgers and Cafe Bustelo coffee brands reported adjusted earnings per share of $1.90 in the fiscal first quarter ended July 31, missing analysts’ average estimate of $1.93.

Shares of Smucker dropped 5.6% at 9:52 a.m. in New York Wednesday. The stock had risen 0.4% this year through Tuesday’s close, compared with a 9.9% gain for the S&P 500 Index.

Smucker boosted its outlook for the full year to a net sales gain of as much as 5%, up from as much as 4%. The company’s net coffee sales in the quarter rose 15% after it increased prices to adjust for higher costs.

To keep up with added tariffs, Smucker plans to hike coffee prices in early winter, Chief Executive Officer Mark Smucker said during a conference call with analysts. “We would likely see an impact to volume in the low- to mid-teens.”

The packaged food company has been battling the impact of higher coffee costs due to President Donald Trump’s trade policy. In June, Smucker warned that tariffs would increase costs in its coffee business and hurt profit. Earlier this month, a higher 50% tariff on Brazil went into effect, hiking the price of coffee from the country, which supplies about a third of America’s unroasted beans.

The company’s sales have also been weighed down from its November 2023 acquisition of Hostess. The maker of sweet treats such as Twinkies has underperformed as some consumers pull back on spending.

Smucker reported that full-year free cash flow is expected to increase to $975 million from $875 million, largely driven by benefits coming through the Trump tax bill.

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