From at-home tests for COVID-19 to lotions and fragrances, inflation is reshaping what we buy

• Earnings reports and revenue forecasts this week make clear inflation is shaping what we buy.
• Retailer Bath & Body Works warned that it now expects second-quarter sales to be down 6% to 7%.

From at-home tests for COVID-19 to lotions and fragrances, inflation seems to dictating winners and losers when it comes to what we buy.

Fresh earnings news and revenue forecasts make clear that many of us are sticking with the things we must buy and thinking twice about some of the small luxuries we often snap up to treat ourselves. It's little surprise given that the US inflation rate, fueled by high energy and food costs, is sitting at a 40-year high.

On Wednesday, Abbott Laboratories, which provides COVID-19 testing kits and makes the baby-formula brand Similac, reported stronger-than-expected profits based on sales of its BinaxNOW COVID-19 tests.

While shoppers might be apt to purchase healthcare necessities and then splurge on small comforts, some price-conscious consumers are opting out of buying items they don't deem essential.

Bath & Body Works, known for its scented lotions and candles, warned Wednesday that it expects second-quarter sales to be down 6% to 7% over the prior year. The company said some consumers are skipping trips to the mall while others are being more cautious when they shop. Bath & Body Works also said it is reexamining promotions and its pricing to try and boost profit margins.

Bath & Body Works said its customer base generally reflects the US population across income levels and that some of its shoppers are looking for items on sale or simply going without.

"Customers, particularly lower income customers, have become more cost conscious and are limiting purchases," the company said in a statement.

At Abbott, the higher sales of COVID-19 tests helped offset financial hits stemming from infant formula shortages and a recall.

Despite surging prices for gas, food, and rent, among others, in-store clothes shopping is up nearly 22% from last year. And consumers are still grabbing snacks at the grocery store, and even simple luxuries like gaming and toy purchases remain stable. Yet the longer elevated prices endure, some discretionary spending could take a hit.

Abbott shares fell about 2% in afternoon trading while Bath & Body Works rose about 1%.