Americans are still spending, but they are changing where and how. As the first-quarter earnings season wrapped up, company after company described the same shift: customers trading down from pricier stores to cheaper ones, buying less on each trip, and hunting harder for deals. The pattern was laid out by Morningstar analyst David Swartz in comments published June 2.
Swartz said shoppers are leaving high-end retailers for mid-tier chains and making fewer trips overall. A single earnings call does not reveal much, he noted, but listen to dozens of them and a clear picture forms of how households are coping with prices that keep climbing.
The spending itself has held up. The year-over-year earnings growth rate for the S&P 500 in the first quarter was 28.6%, according to FactSet, a strong showing. But strong corporate profits do not mean shoppers feel comfortable. They mean companies are managing well in a tough environment, often by selling more to wealthier customers while everyone else pulls back.
That split is the heart of the story. Higher-income households, buoyed by savings and investments, keep spending across categories. Lower-income households, hit hardest by years of inflation, are stretched. NRF and Bank of America research both describe a bifurcated consumer, with the top earners driving most of the growth.
You could see the trade-down in real time on Wednesday, June 10. As the broader market sank, a handful of value names hit record highs. Coca-Cola rose more than 2% to an all-time high. TJX Companies, the parent of T.J. Maxx and Marshalls, also touched a record. When off-price chains and affordable staples outperform on a down day, it signals where shoppers are putting their dollars.
The pressure behind the shift is straightforward. Pandemic-era savings have run dry. Tariffs and the war-driven spike in energy costs have pushed prices up across the board. The Bureau of Labor Statistics reported this week that consumer prices rose 4.2% over the past year, the fastest in three years. Deloitte’s financial well-being index has slipped as inflation reaccelerated.
For retailers, this is both a threat and an opening. Off-price chains, dollar stores, warehouse clubs, and private-label brands tend to win when budgets tighten. Shoppers who once filled a cart at a department store now split their list, buying basics at a discounter and saving full-price purchases for things they truly want. Stores that sell on value are gaining traffic. Stores that sell on prestige are working harder to hold it.
The behavior is also less loyal than it used to be. Yale’s Ravi Dhar, who directs the university’s Center for Customer Insights, has noted that consumers have many levers to pull when adjusting their spending. They are switching brands, waiting for sales, and buying smaller quantities. That makes shoppers harder to predict and forces retailers to lean on personalized promotions and sharper pricing to keep them.
For business owners, the lesson from this earnings season is clear. The customer is not gone, but the customer is choosier. Winning means meeting people where their budgets actually are, with real value and visible savings, rather than counting on the brand loyalty that carried many stores through easier years.
Whether the trade-down deepens depends on prices and paychecks. If inflation stays hot and wage growth lags, expect more households to keep moving down market. The next read on spending comes when the Census Bureau releases May retail sales on June 17, which will show whether the caution showing up on earnings calls is denting the registers too.
JBizNews Desk — Retail
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