In February, retail sales in the US slowed down by 0.4% month-over-month, with consumers prioritizing value and cutting back on spending.

Major retailers have cited this slowdown in spending when projecting sales for the 2023 fiscal year, which for most retailers begins in February. Consumers struggled with higher prices in non-discretionary categories, leading to reduced spending in other areas. For instance, grocery and food-at-home pricing rose by 10.2% in February's 12-month rolling index, with specific categories such as cereal/bakery and dairy experiencing significant price increases.

However, Kroger reported a 10.1% increase in sales of its private-label food brands for 2022, demonstrating that consumers are turning to store brands as an alternative to higher-priced national products. Meanwhile, shelter's 12-month rolling price index, which includes rent, hotels, and homeowners' equivalent of rent, increased by 8.1%, the most significant increase over 40 years. This category accounted for over 70% of the all-items index increase in February.

Fashion categories such as apparel/accessories, shoes, and department stores also experienced reduced spending as consumers looked for value amidst rising prices. Larger ticket items such as new cars, furniture, and electronic/appliance sales were impacted by higher interest rates, leading to declining sales.

However, discount and value retailers, including Target, Walmart, warehouse clubs, and dollar stores, grew year-over-year. Additionally, as inflation and recession worries continue, many consumers are turning to second-hand stores and vintage shopping. Retailers such as REI, Lululemon, Levi, Best Buy, Patagonia, and IKEA have started selling pre-owned goods.

Retailers are cautiously optimistic about 2023, as consumers show a trend toward value.