Consumers flash holiday warning signs

By Finance News On Nov 14, 2025

Shoppers walk through Manhattan on Nov. 7, 2025, in New York City.

Spencer Platt | Getty Images

High-income consumers are trading down, Gen Z is spending less, and low-income shoppers are still struggling, according to many consumer companies that shared their latest quarterly results in recent weeks.

Those trends may not bode well for the big-box and mall retailers that have yet to report their earnings. That is, unless the strength of their brands — or high-income consumers who see their products as a good deal — help them transcend the gloomier consumer climate.

While the Atlanta Fed’s GDPNow tracker is projecting 4% U.S. GDP growth in the third quarter, there are cracks showing in the economy. Earlier this month, U.S. consumer sentiment slipped to near record lows, fueled by concerns about higher prices and the federal government shutdown. Plus, private data sources show that the U.S. economy was losing jobs through late October.

Investors will get a wider snapshot in the coming week. Some of the biggest names in retail, including Walmart, Target, Gap and Home Depot, will report their latest earnings and provide insights into how spending during the critical holiday season is shaping up.

According to credit card data from equity research firm and bank Truist, sales have softened in recent weeks across many of the retailers that it watches. Sales trends slowed at Walmart, Home Depot and Lowe’s in October after after they saw solid sales in August and September, according to Truist.

Wall Street has noticed slower spending, too. Michael Baker, a retail analyst for D.A. Davidson, said he now expects weaker holiday spending than he did before as consumers face a challenging mix of higher tariffs, slower job growth and pressure on lower-income households.

He expects holiday sales to grow in the high 3% range year over year, down from the firm’s previous view that holiday sales growth would accelerate from last year’s 4.3% increase.

“There’s just a lot of headwinds building for the consumer and a lot of the data we track [at retailers] was just really bad in September and even worse in October,” he said.

High-income shoppers trade down

For roughly two years, executives have warned investors that low-income consumers were spending less, dining out less frequently and growing picky about their shopping.

Now there are more signs that high-income shoppers are watching their budgets, too. That trend could help some of the retailers reporting in the weeks ahead, such as Walmart, Dollar General and Dollar Tree, while hurting others like Target and Best Buy.

The fast-food industry saw traffic from high-income diners climb by nearly double digits in the third quarter, according to McDonald’s CEO Chris Kempczinski. McDonald’s, often seen as bellwether for the economy, is gaining share with high-income consumers, thanks to deals like its Extra Value Meals, he said on the company’s conference call earlier this month.

“I think sometimes there’s this idea that value…