What Major Retail CEOs Are Saying About Inflation and Consumer Behavior In 2024

Consumers were still feeling squeezed at the end of 2023.

Walmart Inc. President and CEO Doug McMillon
Walmart President and CEO Doug McMillon. Ethan Miller/Getty Images

On Feb. 26, economists of the National Association for Business Economics (NABE) predicted inflation, or the increase in consumer price index (CPI), will drop to 2.4 percent this year from last year’s 4.1 percent and the previous year’s 8 percent.

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Although inflation cooled significantly in 2023, consumers were still feeling squeezed at the end of last year, according to the CEOs and CFOs of the nation’s largest retailers that reported quarterly earnings results recently. Home Depot, Lowe’s, Macy’s and Target all reported declines in sales in the last three months of 2023, citing their customers’ increased discretion when it comes to spending on non-essential and expensive items. Looking ahead, many of them expect consumers to continue to spend cautiously until interest rates begin to fall.

Here’s what major retail CEOs and CFOs are saying about consumer sentiment and inflation in 2024: 

Walmart CEO Doug McMillion and CFO John Rainey: Big-ticket items are a tough sell. 

On a call with analysts on Feb. 20 following Walmart’s quarterly earnings report, CEO Doug McMillon said prices of general merchandise are lower than they were a year ago, but food prices have been less consistent. For items such as apples and eggs, prices have dropped, but for products such as asparagus and blackberries, prices have risen, he said. 

In an interview with CNBC on Feb. 20, Walmart CFO John Rainey said customers “are putting fewer items in their baskets but shopping more frequently,” noting that expensive items like electronics, TVs and computers “have been a tougher sell.”

McMillon in November 2023 predicted a deflationary period going into 2024. He estimated that lower prices could allow customers to pay for more discretionary items. That proved not to be the case as the average ticket slipped only 0.3 percent in the December quarter from the year prior. 

Home Depot CFO Richard McPhail: Customers are putting off home renovation projects.

Citing falling lumber prices, rising interest rates and other factors, Home Depot saw a pullback in consumer spending on big-ticket items during the December quarter. “Customers are still putting off bigger projects—especially the large-scale jobs that may require a loan—because of higher borrowing costs,” CFO Richard McPhail said in an interview with CNBC on Feb. 20.

McPhail added that home values have skyrocketed more than 46 percent since 2019, but turnover has dropped significantly, signaling a downturn in home improvement projects. 

McPhail and CEO Ted Decker labeled 2023 as “a year of moderation” following an extraordinary period of demand during the pandemic. In an interview with CNBC on Feb. 20, McPhail said demand dwindled as consumers returned to usual spending patterns.

Lowe’s CEO Marvin Ellison: Home improvement customers won’t return until interest rates go down.

Lowe's noticed a “continued pullback in DIY spending” in its latest fiscal quarter ended Feb. 2, CEO Marvin Ellison said in the earnings release on Feb. 27.

Similar to Home Depot, limited home turnover has posed a challenge for Lowe’s, as 90 percent of its customers either fully own their house or have a mortgage rate of 4 percent or lower. Ellison predicts the retailer won’t see those customers return until the Fed starts cutting interest rates. 

“When rates come down, that’s going to spur housing turnover and you know what happens when you put the house on the market: You spruce up the paint,” he said in an interview with CNBC on Feb. 27.

On the broader economy, Ellison said, “While there’s increased confidence of a soft landing, there’s still a lot of speculation on the timing of anticipated interest rate cuts and the pace of slowing inflation. It’s also unclear how quickly the consumer will react to these changes and how quickly their spending habits will change.”

Macy’s CEO Tony Spring: Consumers remain under pressure.

Macy’s reported a 2 percent decline in revenue for the December quarter, but  CEO Tony Spring said consumers “proved to be more resilient than expected” throughout 2023, he said on a call with analysts on Feb. 27. “Inflation has slowed, but so has labor and wage growth. As such, we expect our consumer to remain under pressure.”

In an interview with CNBC, Spring, who stepped into the CEO role in early February, shared his optimism for the year ahead. “Yes, there are headwinds, certainly on discretionary categories and the middle-income consumer, but we take responsibility for what we control,” he said. “Let’s put better products into our stores. Let’s make sure it’s merchandised appropriately at a decent value. And then we have more opportunities for conversion and more [market] share.”

Best Buy CEO Corie Barry: Consumers are spending on vacations rather than electronics.

“Inflation has been slowing, but prices for the basics like food and lodging are still much higher and consumers have to prioritize and make trade-off spend decisions,” Best Buy CEO Corie Barry said during an earnings call on Feb. 29. “There is a consumer propensity to spend on services like concerts and vacations in lieu of goods, which has remained sticky, even as the prices there, too, have inflated.”

Like Home Depot and Lowe’s, Best Buy experienced a boom in demand during the pandemic. Consumer spending on items such as refrigerators and laptops has since dwindled as inflation has turned customers away from big purchases. On the earnings call, Barry predicted a year of “increasing industry sales stabilization.”

“We are optimistic that several indicators will continue to show favorability this year,” Barry said. “These include decreasing inflation, leading to the lowering of interest rates, continued low unemployment, encouraging trends in consumer confidence, and the beginnings of a housing market rebound. We remain confident that our industry will grow again after two years of decline.”

Target CFO Michael Fiddelke: We’ve seen a moderation of inflation.

Like other big-box retailers, Target also saw a pullback in discretionary spending in the December quarter. “On the discretionary side of our business, even as we’ve seen improving trends over the last two quarters, overall demand remains soft as spending patterns continue to normalize from pandemic peaks,” Target CFO and COO Michael Fiddelke said on an earnings call on March 5. 

“The theme…we’ve seen this year is a moderation of inflation, but disinflation is the word of the quarter in retail,” Fiddelke added. “That’s a good thing for the consumer. You’ve heard us talk about that being one of the inputs to some share of wallet recovery on the discretionary side of things.”

On the same call, Target’s chief growth officer Christinia Hennington said there’s been a gradual uptick in discretionary spending in the last six months as inflation cooled. Yet she still expects customers to remain “value conscious” in 2024. “While there are some encouraging signs in the economy, there are also stubborn pressures impacting families and retails,” Hennington said. “Consumers say they still feel stretched, they’re balancing a lot and having to make trade-offs to meet the needs of their families while sprinkling in the occasional luxury.”

What Major Retail CEOs Are Saying About Inflation and Consumer Behavior In 2024