Retailers have been cautioning that the consumer environment isn’t improving as inflation and tariffs remain top of mind for deal-seeking shoppers.
On Tuesday, they got another sign that US consumers are growing more pessimistic about the economy, which could prompt consumers to pull back on spending. According to the Conference Board’s consumer confidence index, US consumers’ expectations about the economy dropped to a 12-year low as Americans assessed how shifting economic policies could impact their wallets.
The Conference Board senior US economist Yelena Shulyatyeva told Yahoo Finance that consumers are concerned about tariffs and the higher cost of groceries.
“All this uncertainty around [the] economic outlook is really starting to weigh on consumers’ assessment of how they will fare going forward,” Shulyatyeva said.
So far, President Trump has imposed tariffs on goods from China, Mexico, and Canada (though most goods covered under the United States-Mexico-Canada trade agreement were exempted from the tariffs until April) and implemented duties on imports of steel and aluminum. The president has threatened to go further, including with a wave of reciprocal tariffs expected to take effect on April 2.
According to a recent report from PWC, these tariffs (including the reciprocal tariffs) could impact the consumer products sector by up to $134 billion, roughly five times the current tariff amount of $27 billion.
Read more: What Trump’s tariffs mean for the economy and your wallet
And though the US economy is not yet experiencing a serious slowdown, signs of consumer stress have begun to emerge. Synchrony Financial, a financial company that issues credit cards with retailers, indicated that consumer spending has slowed, and last month, the Federal Reserve Bank of New York reported credit card and auto delinquencies edged slightly higher as household debt grew.
The vibes have been off in retailers’ earnings calls as consumer-facing companies have started to weigh in on the impacts of President Trump’s tariffs and issue dimmer outlooks.
Take footwear giant Nike (NKE), for example. Nike is the latest retailer to warn of a hit from tariffs.
“We expect fourth quarter gross margins to be down approximately 400 to 500 basis points, including restructuring charges during the same period last year,” Nike CFO Matthew Friend told investors. “We have included the estimated impact from newly implemented tariffs on imports from China and Mexico.”
And Nike is far from alone in calling out shifting consumer sentiment and uncertainty in the current trade environment.
Walmart (WMT) and Target (TGT) were among the first to share their plans to manage tariff risks.
“We’re not immune to [tariffs], but we typically will work with suppliers on this,” Walmart CFO John David Rainey told Yahoo Finance. “We’ll shift supply where we need to. We can lean into our private brands. There’s a lot of tools that we have that to try to keep those prices low for customers.”
Rainey said the company has not raised prices yet but will likely pass along some increases to consumers if costs rise.
Meanwhile, Target cut its long-term outlook, which factored in the ripple effects from tariffs. Target’s CFO warned investors on the company’s earnings call that it was unsure what the eventual impact would be on consumer demand.
Both big box stores are now bargaining with their suppliers to ensure they can keep costs low.
“Walmart has tremendous purchasing power and the ability to negotiate,” Telsey Advisory Group’s Joe Feldman told Yahoo Finance, noting its efforts to maintain low consumer prices.
A customer shops at a Target store in Rosemead, Los Angeles County, Calif., on March 4, 2025. (Zeng Hui/Xinhua via Getty Images) ·Xinhua News Agency via Getty Images
Department store retailers have also grown wary of tariff fallout and stretched consumers.
Macy’s (M) issued a weaker-than-expected outlook in early March, which CEO Tony Spring explained as “a prudent approach” due to heightened uncertainty.
“There’s a lot of changes that we’re seeing day-to-day happening with tariffs,” Macy’s CFO Adrian Mitchell added on the company’s earnings call. “We recognize the inflationary pressure.”
Kohl’s (KSS) CFO Jill Timm shared a similar sentiment regarding that company’s lower guidance, saying that it will take time “to make necessary changes.”
Specialty apparel retailer Abercrombie & Fitch (ANF) also posted weaker-than-expected 2025 guidance partially due to tariffs’ impact on freight costs and consumer spending.
“We expect the first half will be adversely impacted by higher year-over-year freight costs and more normalized carryover inventory selling, and the second half will benefit from expected lower freight than last year,” Abercrombie CFO Robert Ball told investors on a call, adding that the company’s outlook includes current tariffs on China, Canada, and Mexico but not “other potential incremental tariffs.”
Ball later added the team has taken action to avoid raising prices and is “mindful” of customers’ value perception. He said the company won’t make “significant changes” but hinted a slight price hike could be on the table.
Should heightened uncertainty around tariffs slow the US economy further, Dollar General (DG) CEO Todd Vasos expects “trade down [among consumers] to accelerate” as shoppers look for bargains. That could make discount stores more appealing.
Vasos told investors last week on a call that the company is “not anticipating improvement in the macro environment, particularly for our core customer.” He added that lower-income consumers are in an “already stressed financial condition.”
Higher costs from tariffs are expected to hit lower-income consumers who are already struggling, S&P Global Ratings retail director Matt Todd told Yahoo Finance. Roughly 60% of Dollar General sales come from a household with an income of less than $35,000.
Investors will learn more about how discount retailers are faring when Dollar Tree (DLTR) reports earnings on Wednesday before the market open. In particular, analysts will be watching for Dollar Tree’s tariff mitigation strategy and whether it expects tariffs to negatively impact margins.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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