Retail had a 'surprisingly robust' first quarter, but the real test is ahead as tax refunds dry up

Key Takeaways

• The retail industry emerged from a choppy first quarter relatively unscathed, but higher than usual tax refunds and an uptick in buy now, pay later use likely helped to buoy spending.
• As Wall Street looks ahead to the second quarter, the period could offer a clearer view on consumer health and just how much high gas prices and persistent inflation have disrupted the economy and pressured already-strained household budgets.
• "Once you got through April and May, you're really not seeing the impact of tax refunds anymore, and those months were a little bit choppier, so there's a lot of moving pieces that maybe kept the consumer going for longer than we would have expected," said Janine Stichter, a retail analyst and managing director at BTIG.
• "As you peel back these tax refunds, you might start to see some of the underlying weakness … the consumer has not yet fully fallen apart and that's why I think people are really looking to Q2 to say, 'All right, well, what does the health of the consumer actually look like?'" The period between February and May — which encompasses many retailers' fiscal first-quarter results — brought a fresh wave of concerns about household spending.
• President Donald Trump started a new conflict in the Middle East, which led to surging gas prices, plummeting consumer confidence and renewed concerns about the health of the U.S.