Today's lesson: What the critical back-to-school season tells us about the state of the consumer, and in turn the economy.

Spending on K-12 and back-to-college combined is expected to hit a record of nearly $147 billion, according to the National Retail Federation. But in what may be a sign of the strains shoppers are under, they're searching for cheaper goods and supplies. We're still early in the season but we found this week that two of the nation's biggest retailers, Walmart and Target, are racing to accommodate them.

"Customers are responding to just absolutely fantastic investments in price," Walmart's U.S. CEO David Guggina said yesterday during the company's earnings call that highlighted the cost pressures facing consumers.

"We have a list of 14 key items that are priced less than what we saw in 2019," he also said of the store's school supplies, citing examples from the store's Pen+Gear brand, which has crayons for 25 cents and No. 2 pencils for 92 cents. "And those prices are resonating with customers and we're seeing it in traffic, ticket and unit volume all growing."

For students heading back to college, the top-selling category was decor, he explained. "Business areas to call out would be candles, throws, rugs and lamps. Those all posted double-digit and triple-digit comps." The shop is also eyeing food sales with "a new back-to-school lunch basket with 10 high-protein lunches for under $2."

"[W]e're pleased with the way back-to-school and back-to-college have started," Walmart CEO John Furner said. At another point in the call, he noted that this is a "softer consumer environment" than in February.

On Wednesday, Target CEO Michael Fiddelke said that for the back-to-school season, "executing the fundamentals so well matters so much." He was referring to the challenges of timing, and the way that the first day of school varies across the country.

"We know we don't win in a season where every school peaks at a different time if we don't have inventory at the right place at the right time, and if we aren't providing a great guest experience," he said. (Inventory has been a sore spot for the company, one of many issues blamed for the yearslong slide from which it's showing signs of recovering.)

Target's chief merchandising officer, Cara Sylvester, noted that the retailer had "enhanced the shopping experience with AI-powered teacher and college wish lists and more personalized content on our app's home screen." She tied the change to a 50% increase in people making wish lists and adding more than double the number of items to them.

But, again, the retailer said that it's focused on pushing prices down. It has held or cut prices on 95% of its school supply goods while lowering prices on 10,000 products since the beginning of the year. Said Fiddelke: "We think it matters to consumers right now."

Next week, with Best Buy reporting, we may learn more about how parents are handling pressures to buy new laptops, e-readers, and other student-centric devices in a time of economic uncertainty.

Lila MacLellan Editor, CEO Brief

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