Transcript:Caroline WoodsJoining me now, Christine Short, Head of Research at TMX Group. Christine, thanks so much for being here.

Christine ShortThank you for having me.

Caroline WoodsSo we’re talking retail is of course, heard from a lot of the big names in the retail space in terms of earnings. We have Black Friday this week. Tell us what’s the single biggest takeaway about the consumer that we know right now.

Christine ShortYou know it’s not new. We’ve been hearing about this for a little while. But from a lot of the earnings reports that we’ve heard recently, it’s about this bifurcated consumer that retailers are still seeing strength with higher income consumers. But on the lower end they’re continuing to see that squeeze. And overall, I think across all income brackets, consumers are really looking for a bargain.

Christine ShortThey’re looking for value. That’s why you’re seeing you know some of the discounters like Walmart still perform well, although they even saw it said they saw some moderation from the lower income cohort and then the off price retailers. So TJX companies, Ross stores, anyone that’s, you know, giving a perceived value something worth more. But you’re getting a bargain for it.

Christine ShortThat’s what customers are looking for.

Caroline WoodsSo customers continue to be price conscious, but they’re still spending.

Christine ShortThey are still spending. Whether or not that’s a good thing, if you look at the latest New York, I fed reserve Bank, quarterly report on household debt and credit. Credit card debt balances have gone up about 5.8% in the third quarter versus the year ago. So it just shows that to fund some of these purchases, consumers are relying a little more on debt for their daily, you know, everyday expenses.

Caroline WoodsSo how concerned are you about the consumer based on what we’ve heard from retailers, but also based on statistics like that?

Christine ShortYeah, it’s funny. I kind of look at everything in three buckets. I look at what the companies are saying, I look at what the data, the economic data is saying, and then I look at what consumers are saying, because some of these surveys, like the University of Michigan Consumer Sentiment Survey, reported their lowest reading in or their second lowest reading in the eight years that they’ve conducted this survey.

Christine ShortBut it doesn’t always mesh with how consumers are spending, but it does show the concern they’re preparing themselves for what might come. Right. Between the government shutdown the longest in history, we’re still unsure of tariff impacts or what’s going to happen with trade policy. Some of these jobs we’ve been seeing some pretty big layoffs. We still don’t have up to date jobs report.

Christine ShortSo I think overall consumers are feeling kind of this, this tense, anxious feeling about what to expect in 2026. But then I’ll look at other surveys, like the National Retail Federation survey on holiday spending, and most people surveyed are spending. I think they had, over the holidays, $890 this holiday season versus last season, which was a record of $900.

Christine ShortSo we’re just about $10 below the spending of last year. Some of that can be, you know, inflation, but also it just shows consumers are still spending. And families, in fact, are expected to spend $33 more in this year versus last year. Whether they’re they’re putting that on credit cards, we’ll see in the next fed report. But so those those two surveys are kind of telling a different story right?

Christine ShortThere is the anxiety out there. But they still want to make this holiday season great. They’re willing to spend for it.

Caroline WoodsIs there anything in any of the data, though, that indicates a recession could be on the horizon, or the economy could be severely contracting?

Christine ShortI don’t think there’s anything right now that’s pointing to that. We are still seen quite a resilient consumer, but I know there’s been chatter about recession. There’s been a chatter of a correction in the stock market. You know, a couple of big bank CEOs talking about that at recent investor conferences. And so I think that all impacts, how consumers are feeling about their ability to spend and keep a job going forward.

Christine ShortAnd so you’re seeing some of that reflected in the surveys. But there is not one data point I can say right now, yes, for sure, this is heading in this way or that way. It’s still all at the end of the day, pretty good data. But we’re continuing to see this slowing.

Caroline WoodsYou mentioned the uncertainty around tariff impact. What’s the read through from the the majority of the retailers that you heard report in terms of the impact that they’re feeling from tariffs right now?

Christine ShortYeah, many of them have reported on taking this multi-pronged approach. It’s different for each retailer, but it has included raising prices which most consumers have stayed on board for, but also moving supply chains, moving production, negotiating with suppliers. So it hasn’t been one thing, but it’s included a, you know, a combination of all these different moves. But they be for the most part, I think, been able to offset where tariffs are at current levels.

Christine ShortBut were that to change, you know, they’d have to get in there and rework it.

Caroline WoodsBut what happens if the Supreme Court actually strikes down the current tariffs. Any talk from retailers about what that could mean and could that flow through to earnings then.

Christine ShortYeah I that would certainly help the bottom line. But again that’s that’s giving you this other prong of uncertainty. Right. Because we’re still not sure. It makes it hard for companies to plan to give guidance whether or not the tariffs get struck down, whether or not they stay at current levels or go up. And so I think overall, what you’re hearing in the reports is it’s getting harder to give guidance into 2026.

Christine ShortSo they’re just operating as an as is, you know, the data they have now. But we’ll reevaluate certainly if something like that changes.

Caroline WoodsSpeaking of guidance, what can we expect from the holiday shopping period. Because we know that really kicks off. It’s already been kicking off. I’ve already been getting Black Friday specials as of last week. But you know, we have Black Friday. We have Cyber Monday coming up. This is really a key time for retailers. Yeah.

Christine ShortAnd like you said some of these deals have been going on for the last I think Amazon started theirs on November 20th. So it’s creeping into the week before Thanksgiving now more than ever. So like I said, the National Retail Federation thinks things are going to be quite studies likely to be the second strongest, holiday shopping season.

Christine ShortThey’re expecting shopping to, surpass the 1 trillion mark in spending. And so by all accounts, you know, firing on all measures. And if you look at some of what the retailers are saying, they’re off to a pretty good start. People are still out here buying there’s winners and losers, of course, as there always is. I do think you’re going to have to continue to sell some deep discounts.

Christine ShortLike I said, the consumer is very value driven right now. So I don’t want to see those promotions. And I have been seeing those 40% off, 30% off. So really to push inventory and to woo customers in there, having to offer these deep discounts so that consumers feel like they’re getting a deal.

Caroline WoodsCan you highlight some of the winners that you’ve seen this season? Obviously, Walmart was a big winner at target’s expense.

Christine ShortYeah, it’s so funny how that has fallen out. But yes, Walmart some of the off price retailers. So TJX, the parent company of HomeGoods Marshalls and TJ Max Ross stores, another off price retailer. Both of them increased guidance for the full year because of how well they were doing. They were seeing, you know, increases at all income cohorts.

Christine ShortAnd, you know, on the downside of things, you actually had the home improvement retailers. So it was Home Depot versus Lowe’s. Lowe’s actually outpaced Home Depot a little bit, but both of them said, that they decreased full year guidance. Home depot specifically said even with their wealthier income cohort, they were seeing people pump the brakes a little bit on high cost projects, large ticket items waiting to see where things were headed.

Christine ShortSo not necessarily investing in those large products projects. And we’ve seen that in the last quarter, that they saw folks delaying some major projects. On the other side, I’m trying to think of some other target, like you said, they, you know, haven’t given the perceived value that they once did. And they are losing, you know, out to Walmart.

Christine ShortCertainly. I think surprisingly, gap actually did quite well. So it, you know, it has me wondering about some of the other apparel retailers that work across cohorts. So they have Old Navy. Of course they have gap. Those were the two sort of winning subsidiaries within the Gap report. So you can still it’s not that consumers aren’t shopping at places that aren’t discounters are off price.

Christine ShortBut again gap gives some pretty good sales. So I think that’s why consumers are coming in for those deep discounts.

Caroline WoodsAlthough interestingly enough, the CEO of gap was on, I believe it was CNBC, and saying that they don’t have to lean as heavily on to sales this holiday period. So it seems like there’s just, you know, the the brands that consumers want right now. I don’t know how much social media plays into that. Just finally, when it comes to retail, we, we obviously talk a lot about or we look a lot at same store sales growth, but because of the inflationary impact, because prices keep rising, do you think that we should be more focused on things like foot traffic to give us a better sense of how much people are actually shopping and thenin turn, spending?

Christine ShortYeah, that’s a great point. Even like some of the other surveys I’m talking about on consumer spending, it’s of course the consumer spending is going up, but it’s because of inflation, because things are costing more. Even looking at number of items purchased or like you said, foot traffic can certainly help you put together that mosaic. So we’re we’re not leaning on one data point.

Christine ShortWe’re having to kind of look at everything to figure out you know, how well is this retailer really doing? But because like you said, the CPI, the increased inflation is making that picture a little more murky.

Caroline WoodsAll right, Christine, really appreciate all of your insights. Thanks so much for joining us.

Christine ShortThank you so much for having me.

Caroline WoodsThat’s Christine Short, Head of Research at TMX Group.