Consumers taking on more debt is a ‘very real’ concern: Retail expert

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Consumers spending less on discretionary items, more on basics amid high inflation: Retail expert

Founder of SW Retail Advisors and co-founder of DealmakeHers, Stacey Widlitz, weighs in on new retail data, which showed Americans pulled back on spending at stores in July, a sign that high inflation is starting to impact U.S. households. 

Founder of SW Retail Advisors and co-founder of DealmakeHers, Stacey Widlitz, warned on Wednesday that the fact that consumers have been taking on more debt is a "very real" concern. 

Widlitz pointed to a "slew of retailers," who reported second quarter earnings this week and noted that inflation is "hurting the consumer" as it sits near 40-year highs.

The retail expert provided the insight on "Mornings with Maria," Wednesday, as data from the Federal Reserve Bank of New York released earlier this month revealed the amount of credit card debt people have increased 13% in the second quarter compared to the same time last year, representing the largest increase in more than 20 years. 

Shortly before Widlitz appeared on the program, it was revealed that spending at retail stores stalled out in July and, instead, consumers turned to online shopping. 

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Spending at retail stores stalled out in July and instead, customers turned to online shopping, new data reveals.  (iStock)

Retail sales, a measure of how much consumers spent on a number of everyday goods, including cars, food and gasoline, was flat at 0% in July, unchanged from the prior month, the Commerce Department said Wednesday. Economists surveyed by Refinitiv expected sales to rise 0.1%.

It marked a major decline from an increase of 0.8% in June, which was downwardly revised from the initial report of a 1% uptick.

The July advance is not adjusted for inflation, meaning that consumers may be spending the same but getting less bang for their buck. When taking inflation into consideration, retail sales would likely show a modest but steady decline in recent months.

When excluding spending on autos and gasoline stations, sales actually increased 0.7% in July. Internet sales surged 2.7%, boosted by Amazon Prime Day. Spending at home and furniture sales also surged in July, jumping 1.9% for the month. 

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Widlitz weighed in on the new data, noting that some department stores have been saying that customers have been using their debit cards less and credit cards more when making purchases. 

"That is not what we want to see," she said.  

She also noted that big retailers have been saying that customers have been shifting away from discretionary items.

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"Let’s face it, if you have a finite wallet and you’re paying 10% more on your food, that’s where you’re spending more money," Widlitz argued, adding that she expects that trend to continue into the holiday season. 

According to the latest inflation data, the rapid pace of inflation slowed in July for the first time in months, but prices remained near the highest level in 40 years.

The Labor Department earlier this month said that the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries and rents, rose 8.5% in July from a year ago, below the 9.1% year-over-year surge recorded in June. Prices were unchanged in the one-month period from June.

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Former Toys ‘R’ Us CEO Gerald Storch argues that sentiment is reflected in retail earnings reports and the new data that showed Americans pulled back on spending at stores in July.

Scorching-hot inflation has created severe financial pressures for most U.S. households, which are forced to pay more everyday necessities like food and rent. 

The food index, for example, climbed 1.1% in July, putting the 12-month increase at 10.9%, the highest since May 1979. Consumers paid more for items like cereal, chicken, milk and fresh vegetables. 

"I think a lot of retailers after COVID were so under-inventoried due to supply chain issues, and now we’re in a situation where inventories are just bloated and everybody is trying to clear the decks, and, as a result, margins have come way down," Widlitz added.  

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She pointed to earnings from Target released on Wednesday, which revealed that the retailer missed comparable sales estimates as inflation impacted customers’ ability to spend. 

FOX Business’ Megan Henney contributed to this report. 

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