Most consumers have cut back on spending because inflation is squeezing their wallets, but they haven’t stopped paying for brand-name health and personal care products, said Kenvue CEO Thibaut Mongon.

Mongon told CNBC on Thursday that consumers are still willing to spend on the company’s branded products — even if they cut discretionary spending at retail stores and cut back on some essential items by changing their usual purchase size or switching brands at lower prices.

the Johnson & Johnson pop-up consumer Kenvue beat second-quarter revenue and adjusted earnings estimates on Thursday, helped by resilient demand for the company’s wealth from widely recognized brands like Band-Aid, Tylenol, Listerine, Neutrogena and Aveeno.

However, the company’s share price fell after J&J announced that it would launch an exchange bid to reduce its stake in Kenvue much earlier than expected.

Kenvo also noted that “private label” penetration into the consumer health products market was stable during the quarter. Private label refers to products that are manufactured and sold under a specific retailer’s name and are sold at a lower price and are intended to compete with branded products such as Kenvue.

These spending trends could bode well not only for Kenvue, but also for other companies in the consumer health, beauty, and beverage industries that may not see consumers turning to cheaper products as often despite higher prices.

“We are now living in a volatile environment with continued consumer uncertainty and continued inflationary pressures,” Mongon told CNBC. “But I think people are very focused on their health and well-being right now.”

“They want to make sure they are doing what it takes to improve their health,” he said. “They’re looking for reliable, scientifically backed, and effective solutions to take better care of their health, and that’s what we and our brands do. It’s what we’ve been doing for a long time.”

Kenvue expects continued strong demand in the coming quarters. The company expects 2023 sales to increase between 4.5% and 5.5% over last year.

RBC Capital analyst Nick Moody expressed confidence in Kenvue’s ability to “maintain its momentum,” highlighting consumer confidence in the company’s brands, health and personal care products in general.

He noted that trade reduction pressures have increased for some companies, based on their market share changes over the past few months. Meanwhile, Kenvue has gained market share, and will likely continue to do so despite the broader environment.

“If we were going to see a decline in trade with them, we would have started to see it already,” Modi said.

Like Kenvue, some beauty and beverage companies may not see the same kind of trade declines as some core consumer sectors during the current period of macroeconomic uncertainty, according to Modi.

He said beauty products such as makeup are increasingly seen as an “affordable luxury” even as inflation squeezes consumers’ budgets.

“They don’t want to feel bad about their situation and buy cheaper makeup,” Modi said.

companies like Hollandwhich sells cosmetics, skin and hair care, and other beauty products, has benefited from the flexibility of the beauty category.

Earlier this year, Ulta said its 2022 revenue exceeded $10 billion, while annual net income exceeded $1 billion — both company records. Ulta also reported first-quarter earnings that beat expectations in May, largely driven by demand for its beauty products.

Oddity Tech, a beauty and wellness company that uses artificial intelligence to develop cosmetics, also appeared to be harnessing the power of the beauty category when it made its public market debut on Wednesday. Shares of the direct consumer platform rose 35%.

Beverage companies are also well positioned, Modi said, noting that big brand names such as Coca-Cola are not at great risk of private label penetration.

Coca-Cola’s first-quarter earnings beat expectations for higher demand for its beverages. But price increases for its products, which were implemented to mitigate the impact of inflation, also helped support results.

Monjon said consumers are turning to brands and products they “know and trust” during tough economic times.

The behavior — and a growing focus on health and well-being — is fueling demand for Kenvue products, which have been “in homes for years, decades, sometimes generations,” he said.

Modi agreed, adding that the Covid-19 pandemic has greatly increased consumers’ attachment to brands, especially those that help people take care of their health.

For example, demand for Tylenol soared and outpaced other pain relievers during the pandemic as people scrambled to stock up on essential health products.

“During the time frame of Covid, you were looking to save your family or get your kids through a difficult period of time with certain medicines and products, and I think that kind of emotional connection and sharing helped sustain the brand,” Modi told CNBC.

“Consumers tend to trust these brands during the most traumatic moments in their lives, so I think that’s why we’re seeing brands like Kinview remain so resilient despite the overall pressure,” he said.

The pandemic has made consumers more able to “take their health into their own hands at home,” added Navan Tai, an analyst at BNP Paribas Ixan.

This shift is likely to benefit Kenvue and others in the consumer health field, she said, and is “an additional differentiation from other consumer categories.”

I’ve noted that Kenvue isn’t “totally immune” from decline and private-label competition. But she said product recommendations by healthcare professionals offer “some protection”.

Third-party surveys of some healthcare practitioners in the United States from 2020 to 2022 found that Tylenol was the top adult pain medication recommended by physicians nationwide, according to an April Kenvue IPO filing.

Those surveys also found that neutrogena was the leading sunscreen and acne treatment brand in the united states, while listerine was the top dentist-recommended mouthwash.

Mongon noted during the company’s earnings call that these recommendations “ultimately foster a lifetime of loyalty to our brands, loyalty that is passed down from generation to generation.”

Grocery and energy prices are up, and credit card interest rates are going up, but shoppers can expect some relief when they start holiday shopping.

Retailers, striving to impress inflation-weary consumers, are expected to boost promotions as they struggle to get rid of excess inventory that has already been identified.

“This will be the year of the permanent Christmas deal,” said Marshall Cohen, senior industry advisor to NPD Group, a market research firm.

In some gift categories, merchandise can be marked by more than 20% on retailers’ websites, according to Adobe Analytics, which tracks online sales. Computers, electronics, and games are expected to hit discount highs since Adobe began tracking numbers in 2017.

The abundance of deals is a sharp departure from what it was a year ago. This past holiday season, shoppers started buying gifts early to avoid running out of stock and shipping delays. Concerns about not getting hot items meant consumers were willing to pay.

This year, though, retailers have an abundance of merchandise. Shoppers are reluctant to spend because they pay more for food, housing, health care and other items as inflation hovers around its highest level in four decades. People are also spending more on travel and experiences after more than two years of Covid restrictions.

Even with bigger discounts, industry watchers expect a silent holiday season due to extended family budgets. Bain & Co. Consulting Company. It projects 7.5% growth over last holiday season, but when adjusted for inflation, it’s only 1% to 3%. Consulting firm Alex Partners expects sales to increase 4% to 7% year over year – but that’s a drop when factoring in the current annual inflation rate of 8.2%.

“It’s food, medical care, housing and shelter costs. It’s basic services like veterinary care and childcare,” said Leo Feller, chief economist at market researcher Numerator. “All of these things come first before consumers buy holiday gifts.”

In addition, customers may not even want some of the items that retailers offer for sale. Computers, which are expected to enjoy the highest level of discount during the holiday season, according to Adobe, have seen cooling demand. HP, Dell, and Lenovo all reported a drop in PC shipments.

The return of big cuts will be a hard-to-swallow medicine for businesses. It squeezes retailers’ profit margins, as they juggle rising costs. Indeed, WalmartAnd the license plate And the best buy They lowered their earnings expectations as retailers navigate a more promotional environment. Walmart leaders have said that even high-income families are pulling back to buy cheaper groceries, raising concerns that they may be reluctant to squander gifts, decor and other holiday items.

While shoppers have been lounging by the pool and going on long-awaited vacations this summer, the drumbeat of promotions It was already underway. More items were sold during backyard barbecue season than during peak season a year ago.

During the second week of July, 46% of units were under upgrade, according to the NPD Group. This is up from 41% of units offered for promotion during the fourth week of November 2021 – the start of the holiday shopping season.

When Amazon held its main day in July, Walmart chose not to participate in its sales event because a lot of its merchandise was already on sale.

Sales have picked up again in recent weeks, too. In October, Amazon held a sales event similar to Prime Day, the first time it had two discount days in the same year. Target and Walmart started early, too, with Target’s Deal Days running a week before the Amazon event and overlapping Walmart’s Rollback & More event.

This week, Walmart announced that it will hold savings events that begin every Monday in November on its website and then continue in its stores. Customers who belong to the subscription service, Walmart+, will get access to hot deals and popular items seven hours in advance.

Promotions will be particularly visible in certain categories. The apparel and sports and outdoors category already made a noticeable jump in discounts at Walmart and Target compared to the same period last year in September, according to YipitData, a research firm that collects data from consumer receipts and removes retailer’s websites.

For example, at Walmart, clothing items sold for about 20% off, up from about 7% in 2021 for the two-week period ending in September. 17. At Target, apparel items are selling for about 18% off, up from about 4% in the same period last year.

Beauty, on the other hand, had few discounts — which may reflect consumers’ desire to continue spending on self-care or little luxuries like lipstick and lotion, even if budgets are tight in other areas. Discount levels via Ulta Beauty Categories were either stable or slightly lower year-on-year for the two weeks ending September 11. 17, YipitData was found.

Numerator’s Villiers said the level of discount by retailers will also depend on their customer bases. For example, dollar stores or other discounters will need to be more sensitive to consumers’ budget constraints. But luxury brands, which have high-income clients, won’t have to adjust as much, with sales in this category staying strong.

For shoppers like Rebecca Kirschner, promotions over the past six months represent a welcome change. The New York City resident and her fiancé had just signed up for their wedding, and just about everything was on sale

A year ago, I remembered that the shelves were empty. This holiday season, expect that the money you spend on family and friends will go even further.

“Looks like you’ve gone from half plate food to buffet. Every store you go to has a big sales department now,” said Kirchner, 33.

When the economy slows, the classic response for consumer firms is to scale back: slow hiring, perhaps layoffs, cut marketing, or even slow the pace of technology investment, delaying projects until after business picks up again.

But that’s not all the turbulent retail sector in America is doing this year.

With the S&P Retail Index down nearly 30% this year, most of the industry is boosting investment in capital spending in double digits, including industry leaders Walmart and Amazon.com. Among the upper echelon, only struggling Gap and Lowe’s home improvement chain are the ones that cut back significantly. At electronics retailer Best Buy, first-half profit more than halved — but investment is up 37%.

“There is certainly anxiety and awareness about costs, but there is prioritization going on,” said Thomas O’Connor, vice president of supply chain and retail consumer research at consultancy Gartner. “A lesson has been taken from the fallout from the financial crisis,” O’Connor said.

This lesson? Investments by big spending leaders like Walmart, Amazon and Home Depot are likely to take customers away from weaker competitors next year, when consumer discretionary cash flow is expected to rebound from the 2022 drought and revive shopping after spending on goods shrank in Actually earlier this year.

After the 2007-2009 economic downturn, 60 firms classified as “effective growth firms” that invested during the crisis saw their profits double between 2009 and 2015, while the profits of the other firms barely changed, according to a 2019 report on 1,200 US and European companies.

Companies are taking this data seriously, as a recent Gartner survey of financial executives across industries shows that investments in technology and workforce development are the last expenses companies plan to cut as the economy struggles to prevent recent inflation from causing a new recession. Gartner data shows that budgets for mergers, environmental sustainability plans, and even product innovation are falling.

Today, some retailers are improving how supply chains work between stores and their suppliers. That’s the focus at Home Depot, for example. Others, like Walmart, are improving in-store operations so that shelves are restocked more quickly and fewer sales are lost.

Michael Mandel, an economist at the Institute for Progressive Policy, said the trend toward more investment has been growing for a decade, but the spur of the Covid pandemic has been.

“Even before the pandemic, retailers were switching from investments in structures to active investments in equipment, technology and software,” Mandel said. “[Between 2010 and 2020]In the retail sector, software investment rose 123%, versus a 16% increase in manufacturing.

At Walmart, money is pouring into initiatives including VizPick, an augmented reality system linked to employees’ mobile phones that allows employees to restock shelves faster. The company boosted capital spending 50% to $7.5 billion in the first half of the fiscal year that ends in January. This year’s capital spending budget is expected to rise 26 percent to $16.5 billion, said Arun Sundaram, an analyst at CFRA Research.

“It is clear that the pandemic has changed the entire retail environment,” Sundaram said, forcing Walmart and others to be more efficient in their back offices and to embrace online channels and in-store pickup options more. “You’ve made Walmart and all other retailers improve their supply chains. You see more automation, less manual picking. [in warehouses] And more robots.”

Last week, Amazon announced its latest acquisition of warehouse robots, Belgian company Cloostermans, which offers technology to help move and stack pallets and heavy goods, as well as bundle products together for delivery.

O’Connor said Home Depot’s drive to revamp its supply chain has been underway for several years. The supply chain effort is actually hurting profits right now, according to the company’s financial disclosures, but it’s central to both operating efficiency and a key strategic objective — creating deeper relationships with professional contractors, who spend significantly more than their employers. Who were the Home Depot’s bread and butter.

“To serve our professionals, it’s really about removing friction with our many improved product offerings and capabilities,” Executive Vice President Hector Padilla told analysts on Home Depot’s second-quarter call. “These new supply chain assets allow us to do this on a different level.”

Some large scale retailers focus more on updating an old store brand. At Kohl’s, the highlight of this year’s capital spending budget is the expansion of the company’s relationship with Sephora, which is adding convenience stores within 400 Kohl’s stores this year. Landon Luxemburg, a retail expert at consultancy Third Bridge, said the partnership helps the mid-market retailer add an element of flair to its precarious image, which contributed to its relatively weak sales growth in the first half of the year. First-half investment has more than doubled this year in Kohl’s.

Chief Financial Officer Jill Timm said nearly $220 million of the increase in Kohl’s spending was related to investing in cosmetics inventory to support 400 Sephora stores that opened in 2022. “We’ll continue that until 2022,” she told analysts in the company’s latest earnings call in mid-August. Next year… we look forward to working with Sephora on this solution for all of our stores.”

Target is spending $5 billion this year adding 30 stores and upgrading another 200, bringing the number of stores renovated since 2017 to more than half the chain. It’s also expanding its beauty partnership first revealed in 2020, with Ulta Beauty, adding 200 Ulta centers in-store on its way to 800 centers.

The largest spender of all time is Amazon.com, which generated more than $60 billion in capital expenditures in 2021. While Amazon’s reported capital spending numbers include its cloud computing division, it spent nearly $31 billion on property and equipment in The first half of the year — up from a record already in 2021 — though the investment made the company’s free cash flow negative.

That’s enough to get Amazon to squeeze the brakes a bit, with CFO Brian Olsavsky telling investors that Amazon is shifting more of its investment dollars to its cloud computing division. This year, it estimates that about 40% of spending will support warehouse and transportation capacity, down from 55% last year combined. It also plans to spend less on stores around the world – “to better align with customer demand,” Olsavcci told analysts after his recent earnings – which is already a much smaller budget line item on a percentage basis.

At Gap — which has seen its shares fall nearly 50% this year — executives defended their capital spending cuts, saying they need to defend earnings this year and hope to recover in 2023.

“We also believe there is an opportunity to more meaningfully slow the pace of our investments in technology and digital platforms to better improve our operating profit,” CFO Katrina O’Connell told analysts after her latest earnings.

Lowe walked away from an analyst’s question about spending cuts, saying it could continue to take market share from smaller competitors. Lowe’s has been a better performer in the stock market than Home Depot over the past year and year-to-date periods, although both saw significant declines in 2022.

“Home improvement is a $900 billion market,” Lowe’s CEO Marvin Ellison said, without referring to Home Depot. “And I think it’s easy to just focus on the biggest players and quantify the overall market gain just based on that, but this is a really fragmented market.”

With prices rising, some people have decided not to get new clothes, delay big purchases like TVs, or cancel Netflix accounts.

But for now, they still flaunt the beauty.

For retailers, the beauty category has become a rare bright spot as people hold back on spending amid rising inflation. Often viewed as affordable luxury, it’s the only discretionary retail category with unit sales rising in the first half of the year, according to NPD Group, which tracks categories including apparel, technology and toys, as well as specialty beauty products and department stores.

“You might not be able to go out to eat, but you can buy a lipstick,” said Olivia Tong, an analyst at Raymond James.

This spring, Target recalled its beauty sales force, even though it cut its profit forecast for the year twice. Walmart is also investing in this category and rolling out new beauty deals to hundreds of stores, despite its warnings that shoppers are skipping discretionary categories like apparel.

There are other factors working in favor of the industry as well. Weddings and parties are booming again. More people are returning to the office, and they can no longer hide behind their Zoom filters. And during the pandemic, some people are pampering themselves at home with face masks, hair treatments, and other beauty products.

Larissa Jensen, beauty analyst at NPDAnd the It’s called back “Lipstick Index”—a term made famous by Leonard Lauder, CEO of Estée Lauder, to explain the surge in cosmetics sales during the economic recession in the early 2000s.

Even consumer sentiment has plummeted, Jensen said, lipstick sales have been up. This increase carried over to other beauty products. Sales of makeup, including lipstick, rose 20%, skin care 12%, perfume 15%, and hair care 28% in the first half of the year — all growing in units, plus dollars, she said.

Much of the beauty category’s growth comes from families earning more than $100,000 a year, and Jensen said discounters may have a harder time taking advantage of the trend. However, beauty flexibility could offer some protection for big retailers in the event of a slowdown — if they can figure out how to make money.

Walmart and Target both lowered their profit forecasts after having to cut prices for clothing, household goods and other out-of-sell products. However, both companies are modernizing their beauty divisions and adding new brands to attract customers.

A year ago, Target began opening hundreds of Ulta Beauty stores within its stores with brands including MAC Cosmetics and Clinique. The company plans to add more than 250 stores this year and eventually has stores in 800 locations, representing about 40% of its US presence.

And after seeing the fragrance become the top sales driver in the coveted beauty space this past holiday season, he’s also added popular fragrance brands to Ulta stores, including Jimmy Choo Man, Juicy Couture, and Kate Spade New York.

Since January, Target has introduced more than 40 brands to its beauty lineup, including “clean” products that are free of certain ingredients and the proprietary black and white brands.

On an earnings call in mid-May, CEO Brian Cornell said Beauty saw double-digit growth in comparable sales in the fiscal first quarter compared to the same period last year. This has split from other categories, along with foods, drinks and essentials, which have seen a marked slowdown.

At Walmart, new beauty shows were held this summer at 250 of the company’s locations, featuring Mario Badescu, Patchology and other brands usually found in specialty beauty stores or makeup counters in department stores.

An affordable display called “Beauty Finds” is also starting to pop up in nearly 1,400 stores, offering shoppers lip glosses, lotions, and more for $3, $5 or $9.

Walmart also has exclusive deals with consumer-oriented companies like Bubble, a color-packed skincare brand focused on Generation Z and young millennial customers. Over the past few quarters, Creighton Keeper, Walmart’s vice president of beauty promotion, said it’s seen double-digit growth in its cosmetics business.

“Beauty is this wonderful category where it’s not like food and it’s not like health and wellness, but the customer interacts with it and interacts with it every day,” he said in an interview earlier this summer. “You have this mental health component about confidence and feeling good about yourself.”

When budgets tighten, Kiper said customers may also be holding back on skills they’ve acquired during the pandemic — like doing their nails or coloring their hair at home — and going to Walmart to shop for an at-home touch at the salon.

Ashley Marie Lemons, a homemaker mom in an Atlanta suburb, said her family eats less outside because they spend more on groceries, diapers and other necessities. She said she cooks more meatless meals and buys sausages instead of more expensive meats, like ribs.

But she said she still allows herself to spend about $50 a month on beauty products like eyeshadow palettes and mascara.

“It’s an outlet for me,” she said. “Some people love art. It’s a creative way for me to express myself.”

It looks like people are still willing to travel, go to the movies and have a drink or two, even as rising prices and fears of a recession have pushed them back in other areas.

The way people spend their money is changing as the economy slows and inflation rises everywhere including gas stations, grocery stores and luxury retail stores. The housing market, for example, is already feeling the pinch. Other industries have long been seen as recession proof and may be enjoying a shock as people start to move out again after bouncing during the pandemic.

Shoppers everywhere still feel the pressure. In May, a measure of inflation that measures prices for a wide range of goods and services jumped 8.6% from a year ago, the largest jump since 1981.. Consumer optimism about their financial conditions and overall economic sentiment fell to 50.2% in June, the lowest level on record, according to the University of Michigan’s monthly index.

With gas and food prices on the rise, New York City-based artist Brigitte Engler said she’s driving less to her second home upstate and eating out less.

“Twenty dollars seems expensive at this point for lunch,” she said.

Here is a look at the performance of different sectors in light of the slowdown in the economy.

Concerts, movies, travel and other experiences people missed during the height of the pandemic are among the industries with strong demand.

Live Nation Entertainment, which owns concert venues and Ticketmaster, has not yet seen people’s waning interest in attending concerts, CEO Joe Berchtold said at the William Blair Growth Conference earlier this month.

In cinemas, blockbuster films such as “Jurassic World: Dominion” and “Top Gun: Maverick” also achieved strong sales at the box office. The movie industry has long been considered “stagnation proof,” since people who give up expensive vacations or frequent Netflix subscriptions can still often buy movie tickets to get away for a few hours.

Alcohol is another category generally shielded from economic downturn, and people are going out to bars again after drinking more at home during the early days of the pandemic. Even as breweries, distillers, and winemakers are raising prices, companies are betting that people are willing to pay more for better quality alcohol.

“Consumers continue to trade higher, not lower,” Gavin Hattersley, CEO of Molson Coors Beverage, said on the company’s earnings call in early May. It may sound counterintuitive, but he said the trend is in line with the recent economic downturn.

Alcohol sales were also protected in part because prices did not rise as quickly as other commodities. In May, alcohol prices were up about 4% from a year ago, compared to an 8.6% jump for the overall CPI.

Major airlines such as Delta, American and United are also expecting a return in profitability thanks to increased travel demand. Consumers have largely absorbed the higher prices, which has helped airlines cover the steep cost of fuel and other expenses, despite a drop in domestic bookings in the past two months.

It’s not clear if the race back to heaven will continue after the rush of travel in the spring and summer. Business travel usually picks up in the fall, but airlines may not be able to count on that as some companies are looking for ways to reduce expenses and even announce layoffs.

People’s desire to go out and socialize again is also boosting products like lipstick and high heels that have been phased out during the pandemic. That recently helped sales at retailers including Macy’s and Ulta Beauty, which last month boosted their full-year profit forecasts.

Luxury brands like Chanel and Gucci have also proven to be more resilient, as wealthier Americans have not been affected by the price hikes in recent months. Their challenges have been more concentrated in China recently, where epidemiological restrictions remain.

But the fear is that this dynamic could change quickly, and the short-term gains for these retailers could evaporate. More than eight in 10 US consumers plan to make changes to roll back their spending in the next three to six months, according to a survey by the NPD Group, a consumer research firm.

“There is a tug of war between the consumer’s desire to buy what they want and the need to make concessions based on the high prices hitting their wallets,” said Marshall Cohen, senior retail industry advisor at NPD.

The once overheated housing market is clearly among the markets hit by the economic slowdown.

Higher interest rates have dented mortgage demand, which is now half what it was a year ago. Homebuilder sentiment fell to its lowest level in two years after falling for six consecutive months. Real estate firms Redfin and Compass both announced layoffs earlier this week.

“With May order below expectations at 17%, we don’t have enough work for our agents and support staff,” Redfin CEO Glenn Kellman wrote in an email to employees later posted to the company’s website.

For the retail sector more broadly, data from the Commerce Department also showed a surprising 0.3% decline in May overall from the previous month. This included a decline in online retailers and diversified retailers such as florists and office suppliers.

And while demand for new and used cars remains strong, auto executives are beginning to see signs of potential problems. With the cost of new and used cars climbing in double digits over the past year, auto and other vehicle dealers saw sales decline 4% in May from the previous month, according to the US Department of Commerce.

John Lawler, Ford Motor’s chief financial officer, said this week that delinquencies on auto loans are starting to rise, too. Although the increase may signal troubled times ahead, he said it is not a concern yet, as cases of late payments have been low.

“It looks like we’re moving back more towards the middle,” Lawler said at the Deutsche Bank conference.

The restaurant industry is also seeing signs of a potential problem, although how restaurants are affected may vary.

Fast food chains have always fare better in downturns because they are more affordable and attract diners with promotional deals. Some restaurant companies are also betting that people will continue to eat out as long as groceries are rising faster.

The cost of food away from home rose 7.4% over the 12 months ending in May, but food prices at home rose even faster, jumping 11.9%, according to the Bureau of Labor Statistics. Restaurant Brands International CEO Jose Seal and Wendy CEO Todd Penegor are among fast food executives who have highlighted the gap as an advantage for the industry.

But McDonald’s CEO Chris Kempczynski said in early May that low-income consumers were starting to demand cheaper items or cut back on the size of their orders. As the largest American restaurant chain by sales, it is often seen as a leader in the industry.

Moreover, traffic across the broader restaurant industry slowed to its lowest level of the year in the first week of June, according to market research firm Black Box Intelligence. That was after the number of visits also slowed in May, although sales rose 0.7% with higher spending per visit.

Restaurants are speeding up discounting, a sign that they expect same-store sales growth to slow, Barclays analyst Jeffrey Bernstein also said in a research note on Friday. Among the chains that introduced new deals to lure diners, Domino’s Pizza, which offers half-price pizza, and Wendy’s, which brought back the $5 Biggie Bag meal.

Among those striving to adapt to a shift in shopper behavior are large-scale retailers such as Target and Walmart, who have issued cautious guidance for the coming year.

Target warned investors earlier this month that its financial earnings for the second quarter will be hit as it discounts people who bought during the pandemic but no longer wanted, such as small appliances and electronics. The big-box retailer is trying to make room on its shelves for products in demand right now: beauty products, home essentials, and back-to-school supplies.

CEO Brian Cornell told CNBC that the company’s stores and website were still seeing strong traffic and a “very resilient customer” overall, despite the change in buying preferences. Rival Walmart has also been discounting less sought-after items such as clothing, although the retail giant said it is gaining a stake in groceries as shoppers look to save.

Leslie Joseph, Lorraine Thomas, Michael Wayland, John Rosivier, Sarah Whitten and Melissa Rybko contributed to this report.

Check out which companies are making the headlines at midday Friday.

Ulta Beauty — Cosmetics retail sales rose 12.5% ​​after better-than-expected quarterly earnings and revenue. Ulta Beauty also shared a better-than-expected look for the entire year.

American Eagle – The stock fell 6.6% after the retailer reported weaker-than-expected quarterly revenue. American Eagle reported $1.055 billion in revenue versus Refinitiv’s estimate of $1.142 billion.

Autodesk – Shares rose 10.3% after the software company reported earnings and revenue that beat analysts’ expectations. Autodesk reported total net revenue of $1.170 billion which is better than the Refinitiv consensus estimate of $1.145 billion. The company’s earnings came in at $1.43 per share, beating expectations by nearly 9 cents per share.

Big Lots – The shares fell 12.1% after the discount company reported a profit loss. Big Lots cited inflationary pressures while issuing weaker full-year guidance. The company’s comparable store sales also fell more than expected.

Pinduoduo – Shares rose 15.2% after the Chinese e-commerce company reported better-than-expected quarterly results. Pinduoduo also reported 7% in active buyers compared to the same period last year.

Dell – Shares of the information technology company jumped 12.9% after better-than-expected earnings and returns for the previous quarter. The computer maker said it has benefited from a jump in demand for desktop and laptop computers from business customers.

Red Robin — Shares of Red Robin Gourmet Burgers rose 25.1% after the restaurant chain beat revenue estimates and shared a less-than-expected loss in the last quarter. Similar store sales rose 19.7% year over year, topping StreetAccount’s forecast of 17%.

Marvell Technology – Shares jumped 6.7% after the company reported better-than-expected earnings. Marvell Technology reported earnings of 52 cents per share on revenue of $1.447 billion. Analysts polled by Refinitiv had expected earnings of 51 cents per share on revenue of $1.427 billion.

Business Day – Stocks fell 5.6% after the human capital management company reported earnings that came in below expectations. Business Day reported earnings of 83 cents a share, which was lower than Refinitiv’s estimate of 86 cents a share.

CNBC’s Tanaya Machel, Hana Miu, and Samantha Soobin contributed reporting.

Wear track pants with jackets, lipstick, and eye-catching prints on your dresses.

Americans are sprucing up their wardrobes and spending more on stylish clothes, makeup and accessories as they start going out more and venturing back to the offices. Analysts and company executives say the trend is particularly evident among high-income shoppers eager to splurge on such items again, even with rising inflation and an uncertain economy.

“The masks are starting,” Macy’s CEO Jeff Jennett said after the company boosted its earnings forecast and complied with its sales guidance for the year on Thursday.

Those sentiments were echoed by a string of other retailers reporting quarterly results this week, including cosmetics and beauty chain Ulta Beauty and anthropology parent company Urban Outfitters. They said people pay to look their best when they leave the house again.

The latest round of results offers a more accurate view of the economy after two of the biggest retailers – Walmart and Target – sent shock waves across the market with downbeat forecasts and warnings that some shoppers were becoming more price-sensitive amid decades of high inflation.

Executives say rising food and gas prices are putting pressure on low-income Americans who are pulling back on spending. But so far, even the threat of a possible recession isn’t stopping high-income consumers from spending on things they missed during the early days of the pandemic.

At Macy’s, Jennette said shoppers are spending increasingly “hours” browsing stores, especially in urban markets like New York. A year ago, he said people were more likely to be in and out.

“The luxury customer is back in a big way,” he said in a phone interview.

But Jennette notes that shoppers who make less than $75,000 a year seek more discounts.

The division in behaviors also appears to occur at Urban Outfitters. The company’s Anthropologie chain, known for its fun dresses and catering to high-income consumers, saw sales increase 18% in the quarter. At the chain of the same name, which caters to younger shoppers for their first or second jobs, sales were up just 1%.

“There’s kind of a bifurcation that has occurred,” Urban Outfitters CEO Richard Hayne said on a conference call Tuesday night.

But even shoppers trying to save may be willing to buy things like T-shirts or purses they desire — especially if they think the store may be running out of stock, according to one retail expert.

Jan Kniffen, CEO of retail consultancy J Rogers Kniffen Worldwide, said in an interview on CNBC’s “Squawk Box” this week.

Kniffen said people are more inclined to try to save on groceries, as cheaper options may not be different in quality than brand-name brands: “Substitution is very easy in the grocery space,” he said.

Cosmetics chain Ulta Beauty also handily beat Wall Street sales forecasts this week, as shoppers snapped up items to pamper themselves and dress up at social gatherings. The company raised its full-year forecast after first-quarter sales jumped 18% in select locations compared to a year ago.

“New trends are coming in the makeup world that we’re excited about, and it’s definitely a push towards bold, luminous, gorgeous looks and shine,” said Ulta CEO Dave Kimbell. “People are ready to go out in the world and it shows.”

Kimbell said makeup is seen as affordable pampering even when people are on tighter budgets. Express clothing retailer also benefits from eager people to go out and get dressed again, with same-store sales up 31% in the quarter.

“One of the main fashion trends in women right now is head-to-toe color suits,” Express CEO Tim Baxter said in a phone interview. “We haven’t gone through this kind of fashion cycle in a long time.”

The changing behaviors suggest that retailers selling more casual wear, such as pajamas and sportswear, may now be doing more harm than good to their competitors after seeing sales increase when people were walking around the house.

Some are now burdened with stocks of epidemic-friendly clothing they were stockpiling when people were looking for comfort above all else. These items may eventually need a big discount.

American Eagle said Thursday that first-quarter demand was “significantly below” its forecast and trimmed its earnings outlook for the year. Inventory is up 46% from last year. The company’s Aerie division sells casual clothing, exercise equipment, and underwear for teens and younger women.

Abercrombie and Fitch also said inventory was up 45% in the fiscal first quarter from a year ago and lowered its sales forecast for this year. Gap sales fell in the first quarter, dragged down by Old Navy.

“In the past year, we’ve won a lot with Activity & Wool, Baby & Babies, and it’s our sweet Old Navy spot,” Gap CEO Sonia Singhal said in a phone interview. The resurgence of weddings, special occasions, and office life is now putting pressure on those categories, she said.

Gap’s stock is up 34% in the period, and the company has cut its dividend guidance for 2022. Only the Banana Republic chain, which caters to high-income clients, posted a spike in same-store sales.

At an Old Navy store, which Syngal visited recently where the median income in the area is around $100,000, she said the behavior of shoppers hasn’t changed much. But elsewhere with median incomes in the region around $50,000, she said the financial pressures are palpable.

“There is a lot of focus on value for money,” she said, adding that people don’t come in often either.

The mixed results across the industry reflect how the economy affects people as they emerge from the pandemic, said Stacey Widlitz, president of retail consultancy SW Retail Advisors.

“It’s a shift in spending. It’s a shift in behaviour. It hurts different companies differently,” she said.

—CNBC Melissa Rybko Contribute to this report.

Check out the companies making headlines before the bell:

Big Lots (BIG) — Shares of the discount retailer plunged 21.2% in premarket after missing Wall Street expectations for quarterly earnings and revenue. The company also reported a larger-than-expected drop in comparable store sales and issued cautious guidance for the full year, saying inflationary pressures reduce discretionary spending.

Hibbett (HIBB)–The sporting goods retailer stock fell 6.5% in premarket trading after falling short of analysts’ earnings and sales estimates for the fourth quarter. Hibbett said its clients had lower discretionary income than in the previous quarter when stimulus payments helped boost spending.

Pinduoduo (PDD) – The China-based e-commerce platform operator’s quarterly results were better than expected, as China’s Covid-19 lockdown helped boost online spending. Pinduoduo is up 8.8% in the pre-market movement.

Canopy Growth (CGC) – The cannabis producer reported a wider-than-expected quarterly loss, with revenue lower than analysts’ expectations. The company said it expects to be profitable on an adjusted basis in fiscal year 2024. Umbrella growth eased 10.5% in pre-market trading.

Costco (COST) — Costco beat the higher and lower estimates for the last quarter, but the retailer’s profit margins shrunk by about one percentage point due to increased labor and shipping costs. Costco said it was increasing the prices of some foodstuffs to make up for the increases. Its stock lost 1.3% in the pre-market.

Dell Technologies (DELL) — Dell jumped 9.8% in premarket trading, after better-than-expected earnings and returns for the fourth quarter. The PC maker has benefited from a jump in corporate demand for desktop and laptop computers.

Gap (GPS) — Gap shares fell 17.8% in pre-market activity after the apparel retailer cut its full-year profit forecast and posted a larger-than-expected quarterly loss. Gap’s results were affected by higher shipping costs and deeper levels of discounting.

ULTA BEAUTY (ULTA) — Ulta shares jumped 8.4% in premarket trading after the cosmetics retailer beat Street expectations with its latest quarterly report and issued an optimistic outlook. Strong demand for beauty products helped Ulta.

American Eagle Outfitters (AEO) — American Eagle fell 13.4% in premarket trading after its quarterly earnings and revenue fell short of Wall Street estimates. The chief executive of the apparel retailer, Jay Schuttenstein, said the quarter was challenging, with demand well below the company’s expectations.

Red Robin Gourmet Burgers (RRGB) — Shares of the restaurant chain rose 12.9% in pre-market activity after reporting a less-than-expected quarterly loss and revenue that beat analysts’ expectations. Red Robin also updated its full-year cost-of-commodity guidance, due to the effects of inflation.

Ulta Beauty is relying on new brand partnerships to boost lagging makeup sales.

Cosmetics accounted for 43% of Ulta’s total sales in fiscal 2021, the largest share in the sector to date, but it was down from the same period a year earlier. The company said during its fourth-quarter earnings report that brands like Olaplex, Fenty and Supergoop should help drive performance in its core segment.

Net sales were up 40% year over year in the year ended Jan. 30, to $8.6 billion, and rose 24% year-over-year during the fourth fiscal quarter to $2.7 billion, in line with Wall Street expectations for the two periods, according to Refinitiv estimates.

CEO Dave Kimble said that as sales recover from the 2020 slump, the company’s cosmetics segment has proven to be more volatile and lagging behind other categories. He said the beauty business has felt greater volatility from Covid-related changes in shopping and higher prices for consumers.

“When we look at the beauty category, even with these headwinds, we stay positive. The category is healthy. It’s growing. It’s emotionally significant and connected to our consumers,” Kimble said.

In August, the company opened its first convenience store through a partnership with Target. Ulta has opened more than 100 stores within its Target stores so far, and hopes to add another 250 this year.

Executives said the partnership helped spark growth in Ulta’s loyalty program, Ultamate Rewards, which added 4 million members during the fiscal year for a total of 37 million.

The company’s growing bonus base “lays a foundation for continued momentum as we reopen in 2022,” according to Barclays Capital analyst Adrienne Yih.

“The combination of increased brand awareness, targeted partnership, and additions of new brands such as Olaplex, N1 de Chanel and Fenty, leads to new customer acquisition,” Yeh said in a research note.

Ulta has also launched a diversified initiative to support beauty brands by and for Black, Native and People of Color consumers. Fenty, founded by pop star and entrepreneur Rihanna, is one of the many black-owned brands the retailer has introduced in recent months.

“We’re not just here to put these brands on the shelf,” Kimbell said on the company’s earnings call. “It’s one thing to hit our shelves — it’s another to thrive in. And that’s how we measure success.”

“We are doing this to drive engagement with our guests and we see that for our brands. So we are optimistic about beauty – about makeup, and BIPOC will be one of the elements that will help us drive growth in the future.”

Looking at fiscal year 2022, Ulta expects earnings per share of $18.20 to $18.70 on revenue of $9.05 billion to $9.15 billion. Analysts expected earnings per share for 2022 of $17.84 and revenue of $9.14 billion, according to Refinitiv.

Ulta shares fell about 3% Friday after the earnings announcement, it is up about 6% over the past 12 months.

Correction: Ulta shares fell nearly 3% on Friday. A previous version made a mistake in the movement of shares.