Recent discussions between Goldman Sachs analysts and management teams from major retail chains have provided crucial insights into current consumer trends and spending patterns. The meetings, which included executives from Dollar General, Dollar Tree, Five Below, Leslie’s, and Ollie’s Bargain Outlet, revealed a complex landscape where
value-seeking behavior continues to dominate consumer decisions.
According to Goldman analysts Kate McShane and Mark Jordan, while there are some areas of resilience, economic pressures continue to impact discretionary spending, particularly among lower-income consumers. High inflation and elevated interest rates remain significant challenges for retailers and their customers.
Dollar General reported positive growth in non-consumable items during the first quarter, including seasonal products, home goods, and apparel. The company’s partnership with Dolly Parton has shown strong results, and management aims to increase their non-consumables inventory mix by at least 100 basis points by 2027, targeting approximately 20% over the next five years.
At Dollar Tree, management expects fiscal year gross margin
improvement of 50-75 basis points, despite increased costs in the second quarter. The company has begun implementing price increases to offset tariff impacts, though this requires additional investment in labor for re-pricing existing inventory. Their multi-price strategy has proven successful, particularly during the Easter season.
Five Below’s management expressed optimism about their merchandise strategy, highlighting success in collectibles, beauty products, and seasonal décor. The company continues to explore higher price points while maintaining their value proposition. Their real estate expansion plans remain strong, with management actively pursuing opportunities created by other retailers’ closures, including those from the Party City bankruptcy.
Leslie’s is focusing on expanding their professional customer services and implementing new technology across their store network. The company acknowledges challenges in the post-COVID environment but is working to regain market share through enhanced product availability and loyalty program expansion.
Ollie’s Bargain Outlet management expressed confidence in their inventory outlook, particularly citing opportunities arising from retail bankruptcies. These situations typically provide multiple years of product supply, as demonstrated by the Bed Bath & Beyond
bankruptcy, which is expected to yield three years of closeout merchandise. The company has also benefited from taking over CPG deals following the Big Lots bankruptcy, strengthening their consumables category.
Despite some positive indicators, such as falling gas prices providing modest relief to consumers, the overall picture suggests continued financial pressure on working-class and low-income households. High credit card interest rates and persistent food inflation continue to strain household budgets, forcing many consumers to prioritize value in their purchasing decisions.
The retail landscape appears to be evolving, with companies adapting their strategies to meet changing consumer needs while navigating ongoing economic challenges. Value-oriented retailers are finding opportunities in market disruptions, while also investing in technology and service improvements to maintain competitive advantages in a challenging environment.
This comprehensive view from major retailers provides valuable insights into consumer behavior and retail industry dynamics, suggesting that while there are pockets of opportunity, economic pressures continue to shape shopping patterns and business strategies across the sector.