Inflation Threatens Retail Industry Ex-Toys ‘R’ Us CEO Warns

inflation threatens retail industry ex toys r us ceo warns.jpg Business

With the passing of a year since the Inflation Reduction Act, the specter of inflation continues to be a stubborn presence in the American economy, painting a gloomy picture for the upcoming holiday season. Gerald Storch, the former CEO of Toys "R" Us, predicts a challenging period ahead for retailers, as he notes an observable shift in consumer behavior. Reports from several retailers suggest a growing reluctance among consumers to spend on goods due to economic stress, leading to a decline in sales of physical products for the eleventh straight month, once adjusted for inflation.

Last week’s data from the July consumer price index (CPI) showed a 0.2% rise from the previous month, which was in line with estimates. However, prices surged 3.2% from the same time last year, marking the first acceleration in the headline figure in over a year. This underscores the challenge of tackling high inflation, which Pulte Capital CEO Bill Pulte describes as "far from solved". He warns of a looming period of stagflation, characterized by low growth and high inflation, which threatens to exacerbate the struggle of Americans to meet rising costs of living.

Inflation Worries Loom Over US Retail Sector

Inflation Remains a Challenge

A year after the passing of the Inflation Reduction Act, the economy is still grappling with stubborn inflation, causing significant concern for the retail sector. According to Gerald Storch, former CEO of Toys "R" Us, there is a change in consumer behavior, with consumers showing reluctance towards purchasing goods, particularly physical products, whose sales have been down for 11 consecutive months. "I believe it’s going to be a very difficult holiday season, certainly challenging for most retailers," said Storch.

Inflation Trends & Their Impact

Inflation rose 3.2% in July, marking the first acceleration in over a year, and presenting a significant challenge in controlling high inflation. Bill Pulte, Pulte Capital CEO, commented on the current situation, "I think we’re in a period of stagflation right now where you basically have low growth and a lot of inflation. Inflation hasn’t gone away, and I think we’re in the first inning."

Consumers are also struggling with rising interest rates and increasing credit card debt, indicating the financial stress they are under. Furthermore, the burden of student loans adds to the economic pressure they face.

Changes in Consumer Spending & Behavior

Despite these challenges, consumers found some relief in July, with the price of used cars, trucks, and airline tickets falling. However, the costs of essentials like shelter, which account for about 40% of the core inflation increase, rose by 0.4% for the month and are up 7.7% over the past year. This has led to Americans spending $709 more per month on everyday goods and services than they did two years ago, according to Moody’s Analytics.

In response to these changes, consumers are shifting their shopping priorities and choosing to shop at value retailers. Storch noted, "History has shown that in tough times, the consumer shops at Walmart; in great times, more money to spend, then they go to Target."

Bidenomics & The Inflation Reduction Act

Despite the economic challenges, President Biden has advocated for his economic policy, ‘Bidenomics.’ On the one-year anniversary of the Inflation Reduction Act, Biden admitted that the Act wasn’t as much about reducing inflation as he initially communicated. "I wish I hadn’t called it that. It has less to do with reducing inflation than it does providing for alternatives that generate economic growth," Biden said.


The persisting issue of inflation, coupled with consumer behavior changes, presents significant challenges to the US retail sector. With consumers opting for value retailers, high-end stores and brand names could face tough times ahead. While the Biden administration’s economic policy promises economic growth, its impact on inflation remains to be seen, leaving the future of the retail industry uncertain.

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