3 charts from Bank of America that reveal growing consumer caution – Yahoo Finance

March has brought every headline possible to rattle the confidence of U.S. consumers that, by and large, remain gainfully employed with higher wages.
There's banking industry turmoil, a Federal Reserve dead set on crushing inflation by way of further interest rate hikes, rising political rancor around the debt ceiling, and no resolution on President Biden's student loan forgiveness plan.
Yet, there have been very few clear-cut signs of consumers retrenching their spending.
Lululemon (LULU) — seller of $120+ yoga pants — revealed another strong quarter this week (except for its write-down of a failed acquisition). Nike's (NKE) earnings earlier this month were impressive too, in a large part due to sales of pricey Jordan brand sneakers.
Even Foot Locker (FL) CEO Mary Dillon hinted on Yahoo Finance Live this week that consumer demand has remained solid.
But not everything in consumer land has been perfect.
In fact, several yellow flags — perhaps fueled by March's chaotic economic headlines — have been tossed onto the playing field for investors to consider.
RH's (RH) earnings late Wednesday were far from perfect. The company's CEO says consumers are spending less on expensive home furnishings because of weakness in the luxury housing market, inflation, the banking crisis, and higher interest rates.
"We absolutely are [seeing a more cautious shopper] when it comes to categories that are discretionary in nature," Chewy (CHWY) CEO Sumit Singh told Yahoo Finance Live this week. "So consumables and health that make up over 80% of our sales remain pillars of strength. Consumers aren't trading down, and they aren't sacrificing their pet's needs."
And new data out of Bank of America on Thursday has led to a few more yellow flags. Here are the three charts you need to know.
BofA's keyword analysis of earnings calls that took place in the first quarter show that mentions of "weak demand" have reached levels not seen since the COVID-19 pandemic, as indicated in the chart below.
Consumer weakness may be partially to blame.
BofA aggregated credit and debit card spending growth year-over-year in furniture and apparel has been negative for the last several months, the firm noted.
In another surefire sign of consumer weakness, retailers are picking up their promotions in order to entice shoppers, BofA's data suggests. The average percentage of merchandise on discount at select U.S. online retailers has risen to levels slightly higher than those seen in 2019 (see chart below).
BMO Capital Markets retail analyst Simeon Siegel told Yahoo Finance Live this week (video above) he expects a more promotional spring selling season. "I think if you're a consumer, expect deals," he said.
With BofA data showing a more cautious pace of spending for discretionary items, it's logical that inventories appear bloated for many companies right now.
BofA's analysis of U.S. earnings calls in the first quarter found that mentions of "excess inventory" and "inventory de-stocking" are at five-plus year highs. Shippers are also seeing overstocked inventory, BofA's research found.
Case in point is the aforementioned RH.
The company's fourth-quarter sales plunged 14.4% year over year to $772.5 million. At the same time, inventory ballooned about $70 million from a year ago as sales tanked.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on the banking crisis? Email brian.sozzi@yahoofinance.com
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