Election headlines have been coming so fast and furious that they’re drawing consumers’ attention away from shopping at a time the industry is already vulnerable because of a hit to discretionary spending.
That’s the early indication from retail giants this earnings season.
Etsy, for one, pulled its fourth quarter forecast because the macro environment is unpredictable, CEO Josh Silverman told Yahoo Finance.
“We have an election that’s been incredibly mindshare-consuming, and I expect, unfortunately, that that’s going to get worse. And the macro continues to be very volatile,” Silverman said.
Etsy stock fell more than 7% after the online marketplace reported second quarter net income that missed estimates and said gross merchandise sales — the total value of goods sold through the platform — would fall in the low-single-digit range this quarter.
Amazon, for its part, reported online sales rose 4.6% last quarter, slightly shy of estimates, and cited a “cautious consumer.” CFO Brian Olsavsky said the news cycle has been an additional factor.
“When high-profile things happen, or the assassination attempt a couple of weeks ago, you see that people shift their attention to news. It’s more about distractions,” he told reporters on a media call.
While e-commerce companies like Etsy and Amazon have already reported, traditional retail earnings don’t pick up until about the third week of August. One early bricks-and-mortar indication came from Tractor Supply (TSCO). Executives on its earnings call said that elections don't usually cause much change in performance — but that this upcoming election will make its fourth quarter tough to predict.
Analysts agree that the backdrop is challenging.
Nick Jones, managing director of internet equity research at Citizens JMP, said it’s difficult to quantify the effect of the news cycle and political developments specifically, but the general environment is weighing on spending.
“The macro is absolutely dominating the market, and absolutely dominating people’s conversations,” Simeon Siegel of BMO Capital Markets said in a phone interview. He’s a managing director and senior analyst covering retail and e-commerce, and said election news is just one element contributing to shoppers’ sentiment, in addition to unemployment, residual inflation, and geopolitics.
Both analysts said that spending won’t come to a halt and there’s still room for outperformance.
“I think people will be distracted for sure, but people will still consume. If emotions are inflamed, people might opt for the more comfortable experience,” Jones said. That could mean sticking with reliable giants like Amazon.
Because distracted or distressed consumers are being more choosy, retailers have to work harder, Siegel said. “Companies aren’t being gifted revenues, they need to fight and earn them. Simply being, and simply being large, is not the path to winning,” he said. They need to offer “compelling product or experience or value.”
Home Depot kicks off retail earnings on Aug. 13, and things heat up the following week with results from TJX (TJX), Urban Outfitters (URBN), Macy’s (M), and Gap (GPS).
Julie Hyman is the co-anchor of Yahoo Finance's Market Domination and Market Domination: Overtime. Follow her on X @juleshyman, and read her other stories.
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