Walmart sales are up, but it’s flashing a warning sign about buying habits

Date:

Share:

[ad_1]

Walmart ended its fiscal year with strong sales numbers but joined a chorus of large direct-to-consumer businesses in warning that Americans are pulling back on discretionary spending.

The company reported a 4% year-over-year jump in comparable store sales, a number buoyed by an increase in transactions that helped beat analyst expectations. Still, Walmart cautioned that its customers were pulling back on big-ticket purchases including TVs, computers, and other electronics. 

“We continue to see a customer that’s resilient but looking for value,” Walmart CEO Doug McMillon said on the company’s fourth-quarter earnings call Tuesday. 

McMillon said the company was working to give consumers more bang for their buck through price decreases in its U.S. stores. He added that Walmart’s general merchandise prices are already lower than they were a year ago, and in some categories, prices are at a lower level than they were two years ago. The company reported that its average ticket price in the U.S. dropped 0.3% compared to the same period last year. 

Walmart’s stock surged as much as 5% in early Tuesday trading following its earnings results.

Still, the retailer’s strong fourth-quarter results were supported by gains in its grocery as well as its health & wellness business in the U.S., which offset weaker sales in the general merchandise category. 

Less guilty pleasure shopping 

Walmart’s earnings report echoed other businesses that have recently alerted investors about consumers’ spending habits: namely, that they’re continuing to spend on necessities but slowing down on non-essential purchases.

Earlier this month, Adidas reported lower-than-expected sales guidance for 2024—and its CEO said consumer sentiment was weakening worldwide. Adidas’ results came after Nike and Puma also cut expectations for the year ahead.

The fall in spending on non-essentials could signal that a broader decrease in consumer spending is on the horizon as consumers tighten their belts after splurging last year. Because consumer spending makes up a large part of the U.S. economy, a major pullback could be a drag on the overall market.

A report by management consulting firm McKinsey & Company last week revealed that changing consumer habits could explain the decrease in spending on nonessentials. While consumers are shopping as frequently as they were a year ago, they are buying fewer items on average than before, according to the report. 

McKinsey also found the main driver for a pullback in purchases across several categories had to do with higher prices, according to a December survey of 1,000 respondents.

The Commerce Department said in a report last week that retail sales fell by 0.8% last month after rising a revised 0.4% in December. 

Still, while companies sound the alarm on consumer spending, some analysts think it will remain strong this year after 2023 exceeded expectations. 

Earlier this month Fitch Ratings revised its annual real consumer spending forecast for 2024 up to 1.6% from 0.6% based on consumer’s willingness to draw from the money they’ve saved up.

“The strength of the U.S. economy reflects renewed fiscal easing, consumers’ willingness to continue drawing on excess savings, strong household balance sheet fundamentals and a tight labor market,” Olu Sonola, the head of Fitch U.S. economic research, said in a statement.

Subscribe to the new Fortune CEO Weekly Europe newsletter to get corner office insights on the biggest business stories in Europe. Sign up for free.

[ad_2]

Source link

Subscribe to our magazine

━ more like this

Crypto Crime Investigation (C.C.I) Enhances Singapore’s Safety with Innovative Pig Butchering Fraud Recovery Technology

Crypto Crime Investigation (C.C.I) is proud to announce the launch of its groundbreaking Pig Butchering fraud recovery technology, a vital initiative aimed at protecting...

U.S. Treasury removes Francisco Javier D’Agostino from sanctions list after independent review

The United States Treasury Department has removed Francisco Javier D'Agostino from its sanctions list following an independent review that confirmed his business activities were...

Expert Forensic Analysis in Investigating Crypto Investment Scams and Recovering Lost Funds

The allure of cryptocurrency investment, with its potential for high returns, has unfortunately attracted a darker side: sophisticated and deceptive scams. Victims of these...

Asia’s Certified Cryptocurrency Investigator Launches in Singapore: Pioneering Crypto Crime Investigation (C.C.I)

Singapore, – In a groundbreaking move to enhance digital asset security and bolster consumer confidence in the cryptocurrency market, the Crypto Crime  Investigation...

C.C.I Launches as the Ultimate Recovery Platform for Crypto Investors Targeted by Scams

Nevada, Florida – In response to the growing concern over cryptocurrency investment scams, C.C.I (Crypto Crime Investigation) proudly announces its official launch as the...