Most public retailers in Digital Commerce 360’s Top 1000 list of leading ecommerce retailers in North America have reported second quarter earnings results. A few themes emerged from the reports, most significantly that consumer spending on discretionary items is down. That leads to other trends for the quarter, including positive results for discount retailers and decreased spending on home furnishings and improvements. Finally, retailers emphasized the impact of omnichannel sales, a bright spot among otherwise depressed sales.

Read more ecommerce earnings coverage here.

Here are four key takeaways.

1. Consumers were pickier about spending discretionary income

Consumers across the board are hampered by budget constraints, and multiple executives called out economic challenges. 

Shoppers are reluctant to spend discretionary income on goods, preferring to save or spend on experiences instead. That’s hitting apparel retailers particularly hard. Old Navy in particular is experiencing decreased demand from lower-income consumers, The Gap Inc. said in a press release. The brand is not benefitting from consumers trading down from more expensive retailers, according to Katherine O’Connell, chief financial officer.

“Some of the brands that are really winning with our consumers are T.J. Maxx, Amazon, Shein,” she said.

Designer Brands Inc. noted the same trend.

“The health of the consumer and overall macroeconomic headwinds” led to declining sales and made predictions difficult,” said Jared Poff, chief financial officer.

Another shoe brand, Zumiez Inc., cited similar headwinds facing consumers.

Other types of retailers were also impacted by consumers tightening their belts. Sportsmans Warehouse interim CEO Joseph Schneider attributed declining sales to “challenging macroeconomic conditions [that] continue to pressure consumer discretionary spending.”

2. Spending on home improvement and furniture is down

La-Z-Boy reported total sales declined 20% to $482 million in its fiscal first quarter of 2024. Online sales of furniture brand Joybird declined 17% year over year due to “more cautious online consumer demand,” the retailer said.

“In general, furniture consumers sort of hit that saturation point of who’s going to want to purchase online and who’s going to want to purchase in-store. And the majority of consumers do more in-store,” CEO Melinda Whittington said, according to a Seeking Alpha transcript.

Other online furniture retailers’ reports supported Whittington’s suggestion. Overstock, which has since taken over Bed Bath & Beyond’s website, reported revenue declined 20% in its fiscal Q2 ended June 30. The retailer also said customers were ordering less frequently, and spending less when they did order. Wayfair Inc. also reported declines, though they were less severe. Net revenue declined 3.4% in its second quarter ended June 30.

Lowe’s Cos. Inc. and The Home Depot Inc. in the adjacent home improvement category also noted declines in spending on home products. Lowe’s and Home Depot executives both pointed to a pullback in consumer spending on large DIY projects in the quarter. Meanwhile, consumers remained willing to spend on smaller projects. For example, transactions of $1,000 and up decreased 5.5%, Home Depot said.

3. Discount retailers were the winners in second-quarter earnings results

Discount retailers like Dollar General Corp. and Five Below are reaping the rewards of these pressures on consumers. Dollar General grew average ticket, even as traffic declined slightly. Dollar Tree reported sales of discretionary items grew 3.9% in its fiscal quarter ended July 29, 2023, as consumers traded down to dollar stores for those purchases.

TJX Cos. Inc., which owns T.J. Maxx, Marshall’s, Sierra, Winners, and Homesense, also benefited. Sales were “well above the company’s plan, and entirely driven by customer traffic,” the retailer said. 

ThredUp grew revenue 8% by appealing to customers on a budget who are “feeling the pinch across their discretionary purchasing power” from broader economic trends, CEO James Reinhart told investors. 

Not every discount retailer automatically benefits from consumers trading down, though. Big Lots shows that simply having low prices isn’t enough to win in 2023.

“Our results for Q2 illustrate that we remain in a very challenging environment, in which our core lower-income customer remains under significant pressure and has limited capacity for higher-ticket discretionary purchases,” CEO Bruce Thorn said in a written statement.

4. Omnichannel drove second quarter sales

Omnichannel sales aren’t as buzzy as they were early in the COVID-19 pandemic, but retailers still rely on them to reach customers. Walmart Inc. and Target Corp. both credited omnichannel sales for leading online sales in their second fiscal quarters. Both retailers cited their versions of online order pickup as standouts in the quarter.

Several retailers noted that omnichannel customers tend to be more loyal or make more additional purchases.

Bath & Body Works Inc. reported positive results for BOPIS, which it first implemented in Q1 2023. In its fiscal second quarter, adoption grew 25%, the retailer said. About 30% of BOPIS customers buy something else when they pick up their orders, driving further sales, it said.

Similarly, BOPIS and curbside pickup were responsible for most of the online sales growth BJ’s Wholesale Club reported, the retailer said.

Ulta Beauty announced intentions of growing its omnichannel business. Its omnichannel customers purchase 2.5 to three times more than single-channel customers.

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