CRFA senior equity analyst Arun Sundaram discussed trends in consumer spending causing weaker earnings for discretionary goods like apparel and furniture. On "Mornings with Maria" Tuesday, Sundaram highlighted the retail sector growth despite high inflation and pointed to Walmart as a premier example of retailers that have adapted to consumer spending shifts.
ARUN SUNDARAM: With inflation at 40-year highs and consumer spending patterns really starting to shift, you're starting to see a lot more weakness among these discretionary categories, things like apparel, furniture, household appliances. And you're still seeing strong things, those staple categories, things like grocery. So for Walmart, they are seeing really strong growth and their grocery business. But, that's kind of cannibalizing their sales in their more discretionary categories things like apparel. So they're having to rely on really heavy markdowns and promotions to get these products off the shelves. But the good news is that these retailers are taking a really aggressive approach to markdowns and promotions. So because they're taking an aggressive approach this should be short-lived in our view. This could last maybe another quarter or so. But, by the end of this year, I think a lot of these retailers will be in a much stronger inventory position because they're being really aggressive right now, trying to get rid of some of this excess inventory.
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