How Retailers Are Coping With Cautious Consumers

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0:32Luke Vargas:The GOP-led House rejects President Trump's Canada tariffs, but backs him up on his voter ID push. Plus, Elon Musk announces a shakeup at XAI as it merges with SpaceX. And we'll look at how cautious consumers are reshaping retail.

0:48Melissa Minkow:Even though this consumer continues to be very aware of how expensive items are becoming, it's not necessarily meaning they'll pull all the way back. It's just meaning that as a retailer, you have to fight harder for them. You have to bring your A game.

1:04Luke Vargas:It's Thursday, February 12th. I'm Luke Vargas for The Wall Street Journal. And here is the AM edition of What's News, the top headlines and business stories moving your world today. Six House Republicans have joined Democrats in rejecting President Trump's tariffs on Canada. Immediately after the vote, Trump said that Republicans who broke rank would suffer the consequences come election time. Oh, at least one of them, Colorado's Jeff Hurd, said he was comfortable with his decision. Here he was speaking to CNN.

1:35Aimee Look:I say this as somebody that supports the president's agenda of onshoring, reshoring, manufacturing. He's absolutely right. There's a lot that we need to be doing. There are a lot of trade imbalances and trade abuses that are happening, but we need to do it the right way, consistent with the Constitution. And I worry about the precedent that we might be setting if there's a Democratic precedent.

1:52Luke Vargas:The move is largely symbolic. Even if the resolution clears the Senate, President Trump would almost certainly veto it. Nevertheless, Democrats are planning more anti-tariff votes, targeting U.S. levies on Brazil and other countries. Meanwhile, House Republicans were able to advance a key GOP priority yesterday, passing legislation that would significantly tighten federal voter registration requirements. The Save America Act requires that voters show proof of citizenship and would establish a nationwide voter identification requirement for casting ballots. While Republicans have framed the bill as common-sense legislation, Democrats warn it could impose barriers for eligible voters.

2:32Luke Vargas:Here's Journal reporter Anvi Bhutani.

2:35Aimee Look:Now that the legislation has passed the House, it will come to the Senate, where it faces an uphill battle. Currently, with the rules around the filibuster, the Senate would require a 60-vote threshold to be met in order for the legislation to pass. Currently, Republicans have a 53-vote majority in the Senate, which means they need to convince seven Democrats to side with them. But it doesn't look like that support exists currently.

3:04Luke Vargas:There are fresh signs that international pressure on Russia's oil industry is having an effect as dozens of tankers filled with Russian oil float at sea without buyers. Joining me with more is Journal Finance Editor Alex Frangos. Alex, what's going on here, both with these ships kind of loitering around at sea, but also this real pricing squeeze, Russian oil being discounted heavily on global markets?

3:27Aimee Look:There's been a lot of pressure on Russia from European countries and the U.S. in terms of new sanctions on individual boats in their so-called shadow fleet that they've been using to move oil around the last few years. There's also been these seizures that the Trump administration has conducted against shadow fleet ships that mostly work in Venezuela, but are also tied to some Russian oil shipments. And then Trump struck this deal with India to lower tariffs there in exchange for India saying they would cut back on buying Russian oil. So all this has meant that there's all this Russian oil that gets produced, but they have fewer buyers.

4:04Aimee Look:And a lot of the oil is being stored on ships floating at sea waiting for a buyer to say, well, if the price gets low enough, we'll buy it.

4:11Luke Vargas:I mean, everyone wants lower prices, Alex, but they're already quite cheap. And I want you to zoom in on that for us, this really kind of amazing gap that's opening up between what Russian crude oil is fetching on world markets and where international Brent crude prices are.

4:24Aimee Look:Yeah. So normal oil that is sold from non-sanctioned countries sells for something in the$60 to$65 a barrel range. Russia, in order to sell its oil has to offer a discount that's as much as like$27 per barrel. So they lose a lot of money compared to back when they were a legitimate member of the global economy.

4:47Luke Vargas:I guess I'm just curious why this discount isn't making it more tempting then for countries to go in and buy this oil and get a great deal on it.

4:54Aimee Look:Yeah, it's a steep discount, but there are fewer buyers because India is saying they're not going to buy as much. And so then you're left with China. And there are certain buyers in China who are willing to take it, but not everyone. because the other dynamic here is there's a lot of oil in the world right now. The oil price in general isn't that high. So refiners, these so-called teapot refineries in China, the kind of independent, more nimble refiners who buy a lot of illicit oil from places like Russia and Iran and until recently Venezuela, they can afford to say, we'll keep waiting until the price goes down more.

5:26Luke Vargas:That was Journal Finance Editor Alex Frangos. Alex, thanks as always. Thank you. Elon Musk has announced a reorganization of his AI startup XAI just days after it merged with his rocket and satellite company SpaceX. The changes include parting ways with two of XAI's co-founders and comes amid what tech reporter Georgia Wells says is a rapid expansion at the company.

5:50Aimee Look:In the all-hands meeting, Musk laid out a new structure for XAI that divides the company into four main teams. One working on its Grok chatbot, another devoted to a coding-specific AI model, another working on image generation, and a fourth pursuing a project called MacroHard, which Musk described as intended to do digital emulation of entire companies.

6:14Luke Vargas:Musk added that he plans to take SpaceX public by July. And let's quickly spin through some earnings updates we're getting this morning. Zero alcohol beers are helping to drive sales for Budweiser maker AB InBev. The world's largest brewer is contending with a broad decline in drinking, especially amongst younger people, but recorded 34 % growth in its T-Total portfolio last year, led by Corona Zero. Hermes is signaling confidence about its 2026 sales growth after logging a strong Christmas shopping season, and Japan's SoftBank has posted a quarterly profit thanks to gains in its Visions Funds business.

6:51Luke Vargas:Its shares are up more than 9 % so far this year, driven by hopes that stronger AI demand will boost its investments in companies like Arm Holdings and OpenAI. Coming up, we'll unpack what this week's earnings from retail giants tell us about the state of the American consumer. That's after the break.

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7:45Luke Vargas:Let's turn to earnings this week from retail giants, switch are revealing a tale of two worlds in which manufacturers like Kraft Heinz, Coca-Cola, and Unilever face a fragile consumer economy. And yet all the while, American spending isn't dropping. Dow Jones reporter Amei Look covers retail earnings for us and says years of rising prices have battered consumers' pocketbooks and made them increasingly cost-conscious.

8:08Melissa Minkow:Consumers are increasingly switching to lower-cost items. They're increasingly frustrated with high prices and higher inflation. And that is a big challenge for the consumer conglomerates like Coca-Cola or Kraft Heinz or Unilever because people are less focused on the type of brand and more focused on the function amid this challenging environment when it comes to looking at rising house prices, rising grocery prices, and higher unemployment and that sort of thing as well is all straining consumers.

8:42Luke Vargas:Well, joining me now with more is Melissa Minco, the Global Director for Retail Strategy and Insights at CINT. Melissa, your job is to predict consumer behavior so that your firm can work to build suitable tech products to help out companies like some of the ones we've been talking about. Melissa, Amey there was outlining a tricky environment for big retailers. I'm curious how you characterize it.

9:05Melissa Minkow:Yeah, it's a really puzzling environment when it comes to consumers. You have low consumer sentiment or low consumer confidence. You have consumers in our survey telling us that they are pulling back on spend and that they feel prices over the next year are expected to go up and they're worried about it. But then you look at the spending data and they are still spending. So it's not really discouraging them. What it's doing is making them much more strategic shoppers. They're even more savvy than ever before now that they have the technology to support them and help with all of the decisions they have to make.

9:40Melissa Minkow:And in this hyper-competitive market, rather than experiencing decision fatigue, they're just getting savvier and still spending.

9:48Luke Vargas:I mean, this is kind of the enigma, especially of the U.S. economy, right? Like a pretty fragile macro outlook, a lot of anxiety. We've covered here recently about jobs, for instance. The housing market's got plenty of issues around affordability and just availability. And yet the spending is continuing. Is that just a U.S. phenomenon right now?

10:06Melissa Minkow:It actually is. And not even just now, over the last couple of years, it's what I've observed. I'm in a global role. I'm based in London, but I monitor all of the markets. And what I've seen repeatedly is, especially in the UK, consumers are so impacted by the cost of living crisis that they actually do pull back their spend and they're a more conservative consumer overall. But in the US, even though they repeatedly articulate that they are aware of the cost of living crisis and just how difficult prices are becoming for them, they're still spending.

10:38Luke Vargas:Looking at earnings, at least, these companies aren't reporting major losses. You know, even as consumers, you say they're getting creative here, they're trading down, you know, looking for alternate brands, though that it has to have some impact on the bottom line. I mean, there's a reason many of these companies like people to buy their brand name products, right? So I'm just curious what all this means for these consumer facing brands.

11:00Melissa Minkow:Yeah, I mean, it definitely is important to note that private label is growing. It's of increasing interest to consumers. But what retailers and brands are able to do now, thanks to AI and just advanced technology, is be more dynamic with their pricing models. Walmart, for example, has talked about how they've been changing prices at an individual item level in closer to real time. And that's really beneficial for them. And obviously, they've been doing extremely well over the last couple of years because of this economic environment and their ability to adjust. And the more retailers implement that type of fluctuating dynamism with their prices, the more they can react in real time to the market and to the consumer needs and offer them the best prices at that moment, kind of meet the consumer where they're at.

11:44Luke Vargas:And a shopper might see this, what, scan a code here on your phone to see what the actual price is or a digital screen, buy an item on a shelf or something like that?

11:53Melissa Minkow:receiving personalized promotions, for example, if they download the app, or seeing numbers change day by day depending on expiration dates or stock availability.

12:02Luke Vargas:You mentioned private label. In terms of how the brands see this on their bottom line, are they finding ways to increase their margins there? They've got to, right? If that's where the consumer's going, that's got to become a more efficient part of their business.

12:14Melissa Minkow:Exactly. And so that's why I'm thinking about this in a lot of ways as profit protection and not necessarily always cost reduction because there's only so far you can slash your costs. So a lot of times we think about that as lowering the prices for the consumer in the moment, but sometimes it's not that. Sometimes it's maintaining the higher price point or even lifting prices a little bit when you know the consumer is willing to pay more.

12:36Luke Vargas:I've been speaking to Melissa Minko, the Global Director for Retail Strategy and Insights at CINT. Melissa, thank you so much for being with us on What's News.

12:43Melissa Minkow:Thank you for having me.

12:45Luke Vargas:And that's it for What's News for this Thursday morning. Today's show was produced by Hattie Moyer. Our supervising producer is Sandra Kilhoff, and I'm Luke Vargas for The Wall Street Journal. We'll be back tonight with a new show. Until then, thanks for listening.

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