In an interview with CNBC's Becky Quick on "Squawk Box," Cornell talked about Target's challenges, including the cash crunch facing consumers amid high inflation.
Cornell also shed light on consumer behavior patterns at stores nationwide. According to the Target CEO, U.S. consumers are more careful with their budgets, which is then "pressuring discretionary spending."
He added that consumers are buying fewer items. When Target examined overall retail spending and observed the top line, data showed "there's a really healthy consumer out there spending money."
However, Cornell added that for the last few quarters, Target has observed a decline in the units or the number of items shoppers are purchasing. This suggests that while consumers are still shopping, they are spending less in those categories.
Cornell said that for discretionary goods, Target observed seven consecutive quarters of decline in both dollars and units. "This means consumers are buying less apparel, fewer items for their home and fewer toys," added the CEO.
According to Quick, data suggested that there are areas in the economy where things look great. For example, the gross domestic product (GDP) rebounded by 4.9 percent for the third quarter.
But she added that what Cornell is describing sounds "like a recession in certain areas of the economy."
Cornell responded that this was a fair assessment and that it highlights why it's important to study both the top line and to also take a closer look at what's happening in different categories. He added that the impact of the last three or four years of rising costs on how Americans are budgeting each week and understand what they are trading off should also be considered.
"For seven quarters, they've been purchasing fewer discretionary items, and they're not buying the goods they were during the pandemic. Now, that will change over time, and we're certainly planning conservatively in those categories," added Cornell. (Related: More Americans continue to rely on Buy Now Pay Later (BNPL) services to combat inflation and consumer debt.)
Pessimism also extends beyond the major retail players.
According to Michael Msika, a Bloomberg Markets live reporter and strategist, companies this earnings season are increasingly mentioning "weak demand" on earnings calls, which is the highest number of mentions in data going back to 2000.
Despite the reduced spending from Target shoppers, reports found that Americans still shopped online, at restaurants and other outlets in September while also dealing with higher prices, rising interest rates and other headwinds piling up.
Retail sales went up by 0.7 percent in September, more than twice what economists had expected, and close to a revised 0.8 percent increase in August, reported the Commerce Department.
However, retail sales in August were inflated after gasoline prices went up. That was not the case in September when gas prices increased more slowly.
The cost of goods barely increased last September, so the increased spending isn't a reflection of higher prices. Prices for durable goods, such as those sold by appliance and electronics stores, also decreased in September.
The government’s monthly retail sales report only offers a partial look at consumer spending and it doesn’t include many services, including healthcare, travel and hotel lodging.
However, the report covered spending at restaurants, which had a solid 0.9 percent increase. Spending online went up by 1.1 percent last month. Sales at general merchandise stores went up by 0.4 percent.
Sales at home furnishings and furniture stores were flat, while electronics stores and outlets that sell building materials saw declines reflecting a difficult housing market.
But experts say that the robust sales report also means that Fed officials could leave the door open for additional rate hikes. In time, this means shoppers could face higher interest rates for a while.
On the other hand, retailers are offering discounts and other incentives to get shoppers to spend more for the holiday season as they worry about shoppers’ finances.
Best Buy, the nation’s largest consumer electronics retailer, recently launched a new experience that allows shoppers to access deals and gadgets for the holiday season. The items, which kicked off late last September, are only available in limited quantities and exclusively through the Best Buy app.
Several weeks ago, Charles Schwab analyst Jeffrey Kleintop warned about a "cardboard box" recession as consumers and small businesses were pressured by soaring interest rates and elevated inflation.
If the consumer goes, the U.S. economy will suffer.
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