If there is a sign post on the health of the US consumer then it came Thursday.
Tiffany reported horrible comp sales, showing that the upper end of the economy is slowing. While the company blamed China for slowing sales, the sales decrease was too large to be isolated to China.
Then after the close of markets, low-end retailers Dollar General reported weak sales and the stock fell 18 percent in after market. Its competitor Dollar Tree also reported weak sales and its stock fell 10 percent.
Both companies explained that when the Federal government reduced SNAP (Welfare) payments in April, they saw a huge drop off in customers. On the Dollar General analyst call the CEO was asked if perhaps life has gotten better for its customers and they are moving up the economic ladder?
“I am not going to say, it’s not possible [that things got better for our customers} , but we have not seen that in our data. Once again, remember that over 60% to 65% of our sales and consumer base is on that lower demographic area that – of the economic scale. And when you keep that in mind, her life hasn’t gotten any better. And that’s really that customer that we’re serving the most, and that we’re intent on making sure has enough money and enough products inside her house to be able to feed her families,” Dollar General CEO Todd Vasos said.
Both companies also cited health-care and rent costs rising for their customers and the struggle they face to pay for all of this. So the customer is between a rock and hard place as benefits decrease and expenses decrease, so the ability to feed and clothe their family falls off.
We are seeing this not only in the lowest percentile, but look at the retail sales at Gap, Banana Republic, Aeropostal. The list is almost endless in how the US consumer is in dire straits.