The S&P Retail Select Industry Index rose more than 1% Thursday morning as shares of Kohl's, Best Buy, and Dollar Tree surged on better-than-expected earnings results. Results suggest the U.S. consumer was stronger than feared in the prior quarter, even as households were battered by a fuel-price shock at the pump, persistent inflation, and softening confidence, which has led to them draining what little savings they have left.
As Bloomberg notes, the three chains operate in very different parts of the retail sector, yet all surprised investors to the upside in a sign of strength by US consumers who are facing multiple hurdles. Here are the earnings highlights from this morning:
- Kohl's comparable sales declined 1.1%, beating the estimated decline of 1.71%
- Best Buy reported first-quarter sales of $8.9 billion, beating analyst estimates, with comparable sales rising 2%
- Dollar Tree boosted comparable sales 3.5% in the first quarter, topping estimates, driven by a 4.5% gain in average transaction
The result was a surge in their respective stock prices:
With gas prices soaring since the start of the war in Iran, and workers worried about the impact of artificial intelligence amid still elevated inflation, consumer confidence has collapsed. And yet, Americans are still opening their wallets. US data released Thursday showed that consumer spending edged up in April despite accelerated price increases. In fact, spending growth is now drastically outpacing income growth, in a trend that is certainly unsustainable and the only buffer - personal savings - is rapidly being depleted.
At Kohl’s, stronger-than-expected sales boosted the department-store chain’s turnaround. Electronics seller Best Buy said revenue across major categories gained and this month was off to a strong start. Dollar Tree highlighted that customers spent more per transaction.
“Across all income levels, customers are value focused and definitely prioritizing affordability,” Dollar Tree CEO Creedon said on the earnings call.
Shares of all three retailers jumped on Thursday. Kohl’s soared 25%, followed by Dollar Tree with a 16% advance and Best Buy at a roughly 8% gain.
Despite these results, retailers and consumer brands have been saying throughout this earnings season that there is plenty to worry about. S&P Retail Select Industry Index has been range bound since mid-2025.
Last week, big-box retailers including Target and Walmart signaled that shoppers remain resilient despite years of elevated inflation. But higher prices on essentials like groceries and gas have squeezed shoppers’ discretionary budgets, pushing them to trade down to cheaper brands and cut back on less essential purchases. Earlier, new personal savings rate data showed that Americans are frantically digging into their savings to keep up with inflation.
Earlier this month, Kraft Heinz CEO Steve Cahillane said lower-income Americans were “literally running out of money at the end of the month” because of higher costs, especially gasoline.
At Dollar Tree, its lower-income customers are visiting less because of their pressured finances, wrote Neil Saunders, managing director of GlobalData, in a note to clients. The retailer boosted comparable-store sales last quarter 3.5%, but that growth came from a gain in shoppers spending more on each transaction as the number of purchases fell 1%.
“The trips they’ve cut out are those of a more discretionary nature which, on some level, is pleasing because they’re still using Dollar Tree for essentials,” Saunders said.
Meanwhile, Burlington Stores shares tumbled 14%, the most since May 2022, despite beating Bloomberg Consensus estimates.
Some chains have kept prices low amid their own rising costs to maintain market share. But it’s not clear how long they can maintaining that strategy. Walmart warned last week that if fuel prices stay at current levels, prices across the board could rise throughout the year.
While wealthier shoppers have been the driving force behind the US consumer economy for some time, even they are feeling pressure and increasingly trading down to cheaper options. Dollar Tree and other low-priced chains have been courting higher-income shoppers, often with great success. That’s a good outcome for these retailers, but raises doubts about the sustainability of these spending levels.
US consumer confidence edged down this month amid anxiety over the economy, according to the Conference Board. Two-thirds of shoppers reported cutting back on spending due rising prices, with many respondents saying they are delaying expensive purchases and buying cheaper versions of the same item.