Goldman Highlights Thrift Trends Amid Consumer Slowdown

Goldman's Analysis of Consumer Behavior

Goldman Sachs has shared new data from Placer.ai, a startup that monitors and evaluates foot traffic at physical retail stores through mobile devices. The data suggests that consumers are increasingly opting for 'off-price' stores due to high inflation and interest rates putting financial pressure on low- to mid-tier consumers.

Updated Trackers for Store Traffic

The Goldman analysts team, led by Brooke Roach and Evan Dorschner, informed clients that they have updated their trackers for August store traffic. The trackers, sourced from Placer.ai, cover department stores, off-price retailers, select specialty retailers, and others within their coverage.

Improved Traffic Trends in August

The analysts noted an improvement in traffic trends in August across all retailers they monitor, following weaker results in July. However, they highlighted that off-price and thrift trends continue to outperform other consumer discretionary retailers. Meanwhile, department store and specialty retail traffic results have been inconsistent throughout the year. Athletic brands such as Lululemon and Nike Factory Store have underperformed.

Thrift is in...

Full Retail at Lululemon and Nike is Out

It appears that consumers are not keen on paying full retail at Lululemon Athletica and Nike stores. This shift in consumer behavior could be attributed to the record low savings rate and record high credit card debt.

Weakness in Low/Mid-Tier Consumers

The recent earnings season in corporate America revealed significant weakness from low/mid-tier consumers. There has been a notable increase in mentions of a "consumer downturn" during earnings calls, reaching levels not seen since the financial crisis. Similarly, mentions of "trading down" have surged in recent years as the middle class struggles under current economic conditions. This trend was last observed during the Global Financial Crisis.

Transformation of American Consumers

The inflation storm has transformed American consumers into Walmart and Dollar General shoppers. Goldman informed clients in July that Walmart offered the best grocery deals.

Bottom Line

The shift in consumer behavior towards thrift trends and 'off-price' stores is a clear indication of the financial pressures faced by low- to mid-tier consumers. It raises important questions about the sustainability of this trend and its long-term impact on the retail industry. What are your thoughts on this shift in consumer behavior? Feel free to share this article with your friends and engage in a discussion. Don't forget to sign up for the Daily Briefing, available every day at 6pm.