"Buffett's new favorite" Ulta is not doing well, and Lululemon's products are also not selling well. Are Americans' spending downgrading as well?

On the 29th, Lululemon's second quarter financial performance showed that the company's revenue fell short of analyst expectations; ULTA, the beauty retail company recently added to Buffett's portfolio, also disappointed with its financial report yesterday, with overall second quarter performance falling short of expectations.

With sustained high inflation and interest rate hikes, American consumers seem to be entering a new consumption phase. They are beginning to reassess their consumption habits, redirecting more spending to necessities, reducing purchases of luxury goods and non-essential items in response to the increasingly challenging economic conditions.

"Buffett's new favorite" and the "king of yoga pants" have dismal performance.

On the 29th, Lululemon announced its second quarter financial performance. The data shows that the company's revenue fell short of analyst expectations.

• Net income was $2.37 billion, lower than the expected $2.41 billion.

• Total sales increased by 3%, lower than the expected 5.63% growth.

• Earnings per share was $3.15, higher than the expected $2.95.

The company also lowered its annual performance expectations.

• The expected net income is $10.38 billion to $10.48 billion, significantly lower than the previous $10.7 billion to $10.8 billion, and lower than the market expectation of $10.62 billion.

• The expected earnings per share is $13.95 to $14.15, lower than the previous $14.27 to $14.47, but higher than the market expectation of $14.00.

Due to the continued inflation, higher interest rates, and cooling labor market, Lululemon's sales growth in North America is slowing down, with comparable sales in the United States declining by 3%, while comparable sales in China soared by 21%.

Lululemon's stock price fell to $259 after the performance, although it rose 4.2% after the market closed, but the company's stock price has still fallen nearly 50% so far this year.

Emarketer analyst Sky Canavis said, "For Lululemon, this is a rare mistake that reflects product strategy and execution missteps in the face of unstable consumer spending trends and higher risks in the U.S."

Signs of weak consumer spending are not only appearing in Lululemon. ULTA, a beauty retailer that Warren Buffett recently added to his holdings, reported unfavorable financial results yesterday, with second-quarter performance falling short of expectations.

ULTA CEO Dave Kimbell said:

Although many positive indicators in the business have encouraged us, the performance in the second quarter did not meet our expectations, mainly due to a decline in same-store sales.

We are aware of the factors that have negatively impacted the performance of our stores, and we are taking action to address these trends.

Dollar General, the largest discount retailer in the United States, has experienced a performance debacle, with senior management stating that its core customers are feeling financial pressure.

The sales decline of large retail companies like Lululemon and Ulta to some extent reflects weakened consumer confidence and soft consumer demand, intensifying competition in the high-end retail industry.

Have American consumers downgraded their consumption?

Against the backdrop of high prices and increasing inflationary pressures, American consumers are beginning to reevaluate their consumption habits. High-end restaurants and luxury brands are gradually giving way to more affordable options. Walmart has successfully seized this consumer trend with its low-price advantage, and its strong performance in the second quarter is the best proof.

Although Walmart's performance growth reflects that consumers' purchasing power remains strong, this is more of a rational choice that consumers have made under economic pressure. American consumers are choosing to cut expenses and turn to mid-to-low-end large retailers that offer more competitive prices.

Goldman Sachs analyst Chris Hussey pointed out that Walmart's better-than-expected performance is seen as a signal of good consumer conditions, but in reality, consumers are reducing their expenses due to economic pressures and choosing the more affordable Walmart.

DA Davidson analyst Michael Baker said that now the only places people shop are Amazon, Walmart, and Costco. This reflects a decline in overall consumption levels and the undeniable trend of consumer downgrading.

"Walmart does a good job of providing consumer value, and value is becoming increasingly important. Structurally, they are well prepared."

It seems that US consumer spending has finally hit a bottleneck, and a further decline may be just around the corner.