Paycheck-to-Paycheck Strain Sharpens Retail and QSR Spending Gap

Earnings season is offering one of the clearest pictures yet of a consumer base moving in two directions.

Households with stable incomes continue spending, especially on essentials and value-driven purchases. Meanwhile, paycheck-to-paycheck consumers, many of whom rely on hourly, gig or mixed-income work, are tightening budgets, reducing restaurant visits and cutting discretionary purchases.

These patterns track directly with the PYMNTS Intelligence report “Income Instability Is Redefining the Paycheck-to-Paycheck Economy,” which found that 66% of adults in the United States live paycheck to paycheck and 42% do so out of necessity, with 6 in 10 earning non-salaried income that fuels volatility.

Walmart Shows Value Strength Across Income Tiers

Walmart’s third-quarter 2026 earnings results, released Thursday (Nov. 20), demonstrated how value continues to resonate. As CEO Doug McMillon told analysts on a conference call, Walmart “saw strength across income cohorts and especially with higher-income households,” while middle-income customers remained steady, and lower-income families were “under additional pressure of late.”

Comparable store sales in the U.S. rose 4.5%, excluding fuel, and eCommerce increased 28%, driven by grocery and everyday essentials.

Target’s Results Reveal the Pressure on Middle-Income Consumers

Target’s third-quarter 2025 earnings results, released Wednesday (Nov. 19), showed the sharpest signs of middle-income strain. Comparable sales fell 2.7%, with a bit of bifurcation.

On an earnings call, Chief Commercial Officer Rick Gomez took note of “continued softness in discretionary categories like home and apparel, partially offset by growth in food and beverage.”

Target’s guests are stretching budgets, concentrating spending on essentials and seeking discounts across discretionary categories, a pattern consistent with paycheck-to-paycheck households managing volatility.

Elsewhere, T.J. Maxx/Marshalls parent TJX said it is seeing robust sales ahead of the holidays. The off-price retailer released third-quarter 2026 earnings results Wednesday (Nov. 19) that showed a 5% uptick in comparable sales for the quarter, driven by low-income consumers.

QSR Results Show the Sharpest Income-Level Divide

Quick-service restaurant earnings revealed the most dramatic differences between low- and high-income consumers. McDonald’s has been experiencing softer traffic among low-income diners and is the standout here.

But there are differences within the fast-food sector, too. Yum Brands delivered a strong Q3, with system sales up 5%. CEO Chris Turner said Taco Bell delivered “growth across all income bands, and… [saw] more younger consumers and more families coming into the brand” during the quarter.

Sentiment Declines Show Deepening Strain Across Income Groups

The latest consumer sentiment data from the University of Michigan, released Friday (Nov. 21), reinforces the financial pressures visible in earnings. Consumer sentiment fell 4.9% from October and now stands 29% below its level a year ago, marking the lowest November reading in the index’s 74-year history. Current assessments fell 13% in a single month and are 20% below last year, with personal finances and buying conditions for durables each dropping more than 10%.

Year-ahead inflation expectations eased from 4.6% to 4.5%, and long-run expectations fell from 3.9% to 3.4%. However, Surveys of Consumers Director Joanne Hsu said in a press release that personal finances “are weighed down by the present state of high prices.”

Together, these earnings and sentiment data reveal a consumer economy splitting along income lines. Paycheck-to-paycheck households are scaling back, reducing discretionary purchases and limiting restaurant visits. High-income households remain active but are more value conscious.