Americans are proving they know how to shop their way out of a crisis

During earnings season we tend to see sectors converging. Walmart, a pioneer for retailers, had a great quarter. But then Target surprised everyone with a 90% slump in quarterly earnings. What happened?

In short, inflation underscores a key difference between the two major retailers. People shop at Target for things they want; they buy what they need at Walmart. And right now almost everyone is cutting back on indulgence and sniffing out bargains for essentials.

Here’s the deal: On Tuesday, Walmart stock rose more than 5% after reporting better-than-expected sales. CEO Doug McMillon attributed this to lower fuel prices (giving customers more money to spend in-store), a strong start to the back-to-school season, and — key — an influx of wealthier shoppers (those who might normally be leaving). after tarzhay but looked for price cuts at Walmart instead).

Target followed with its earnings on Wednesday, and it was a much bleaker picture. Profits plummeted 90% in the second quarter, even after prices were cut. Its shares are down 3% in early trade.

A key difference between the two businesses is where their profits come from. Walmart gets most of its sales and profits from groceries and other essentials, explains my colleague Chris Isidore. Target relies more on discretionary spending. (That’s sort of the whole brand of Target, honestly — how many times have you gone to Target to buy one thing and then head out with a pair of sunglasses, a rug, a hand blender, new camping gear, slippers, and some skincare products you’ve seen on TikTok that you just have to try…)

Supporting this shift in spending is data released on Wednesday, which showed total US retail sales held steady in June-July, thanks in part to falling gas prices that gave people more money for everyday goods.

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The upshot here is that Americans are still shopping — great news for an economy fueled by consumer spending — but they’re adjusting to a tighter budget.

As Walmart’s CEO put it, “Instead of higher-priced sausage products, customers are increasingly buying hot dogs and canned tuna or chicken.”

We’re seeing this in other industries as well: Planet Fitness, the national gym chain with a low monthly membership fee, is thriving as more people resume indoor training. But high-end boutique studios like SoulCycle are getting hammered.


Through all of the pandemic-era economic upheaval, from lockdowns to a mad housing boom to shortages and staggering inflation, the American buyer has been resilient. And our collective, ingrained desire to buy stuff may well be the force keeping the economy afloat.

Taken together, this week’s retail earnings, including Home Depot’s record quarterly profit, show how consumer behavior is changing. But critically, it doesn’t fall off a cliff like one would expect in a typical downturn. This, coupled with continued strength in the labor market, reinforces the argument of many economists that the US is in fact not in a recession right now.

“No boom. But no recession either,” economist Ian Shepherdson tweeted, citing Wednesday’s retail sales.

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UK inflation hit a new 40-year high, exceeding 10% for the first time since 1982. Rising food prices, up 12.7% from a year ago, were the main contributors to this increase.


When food news breaks, Nightcap is there for every last bite and crumb. But for today’s edition, we have to warn you: don’t read while eating. And maybe wait a few minutes if you’re reading on a full stomach because that might get ugly.

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First: That keto diet monstrosity from the sociopaths at Papa John’s R&D, the pizza “bowl.”

I purposely put “bowl” in quotes there because this isn’t actually a bowl, but a cardboard tray loaded with pizza toppings. The highlight: no crust. Because… reasons? (I figured we all left the Atkins diet where it belonged in the ’90s? Or maybe this is a game for the gluten-averses, in which case I might suggest, like a gluten-free crust?)

Papa Johns is forcing this cheesy mess on the world after a strong few years as a pizza delivery man. But the company says sales are slowing because people are sick of pizza, writes my colleague Danielle Wiener-Bronner. (To which I reply, WRONG. My research shows that it’s physically impossible to be sick of pizza, it’s only possible to be tired Poorly Pizza.)

In any case, the “Papa Bowl” comes in three variants: Garden Veggie, Chicken Alfredo and Italian Meats Trio. Good luck America.

Next: Say cheese.

After years of declining sales, Velveeta is making a comeback. The 2020 lockdown renewed interest in the processed cheese product, which has historically been both loved (whoops, Midwest!) and loathed (heyyy, everyone else).

The brand decided to capitalize on its renewed popularity and pull off some cheesy stunts, like the $15 Velveeta martini. The “Veltini”.

According to a Washington Post journalist who tried it, the drink, made with Velveeta-infused vodka, olive brine, and vermouth, “looks like someone’s dipped a plate of cheese in lukewarm bath water.” As for the taste? “It could be worse.”

Finally dessert…

There’s a new Girl Scout cookie. It’s a variant of Thin Mint, but instead of mint, it’s raspberry. Which seems harmless and fine. I can only assume the strategy here is just to have people who love thin mints say: “But why? Why would you make a new Thin Mint when Thin Mints are already perfect and oh wow I could actually buy a Thin Mint case right now.”
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