Walmart customers are behaving so strangely that owners have to sit in their chairs

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By journalsofus.com


Walmart Chairman and CEO Doug McMillon

Walmart President and CEO Doug McMillon said people are choosing the cheaper option. Derek White-Operation Hope, Inc. Getty Images for.

The current state of the economy has consumers understandably confused, and it appears that major corporate leaders are equally confused about consumer trends.

Forecasts about US spending for the remainder of 2023 and into 2024 vary among industry experts.

Bank of America CEO Brian Moynihan claims buyers have remained relatively stable, while Wells Fargo CEO Charlie Scharf goes a step further, saying consumers are “still very, very strong.” In contrast, some experts, such as Wharton professor Jeremy Siegel, expect a significant decline in demand from consumers after the summer season.

According to Walmart, a useful barometer of shopping sentiment in America as a provider of essential and discretionary goods, it is a mix of all of the above. But Walmart is also struggling with what the impact will be over the next 12 months.


Walmart CFO John David Rainey said at the Morgan Stanley Global Consumer & Retail Conference on Wednesday that consumers behaved so strangely in October that bosses “had to sit on the edge of their chairs.”

He continued, the spending pattern during the last two weeks of October was particularly “disturbing” compared to previous months, although he added that he was not intended to be “alarming” in any way.

Unfortunately for Rennie, Wall Street may already be scared. The retailer’s share price has declined this month: falling 7% after the group’s third-quarter earnings call.

On the call in mid-November, Rennie signaled a change in consumer behavior for the first time, saying: “We see our customers showing continued prudence in looking for value while managing within their household budgets.”

Rennie sought reassurance this week, with Reuters reporting that he said “abnormal” behavior from shoppers and deflationary price pressures had prompted Walmart, a $415 billion company, to rethink its long-term plans. not done.

Customers are becoming increasingly price sensitive

Walmart’s CEO said customers will still be spending big — the 2023 Black Friday period broke records after Americans spent $9.8 billion on goods — but people will be wary of price tags on day-to-day items. Are happening.

The same day as Rainey’s update, Walmart CEO Doug McMillon sat down with CNBC for a more in-depth discussion about shopping habits. “Customers in general are really sensitive right now. They’re prioritizing their orders, and they know that prices are likely to be lower with clearance right before Christmas or right after Christmas, so that’s what we expect to happen.

Earlier, Wall Street titans had said they were seeing the most softness at the lower end of the income spectrum. For example, Citigroup CEO Jane Fraser said earlier this year that “cracks” were beginning to appear among low-earning consumers.

McMillan said Walmart is not seeing that, explaining: “Everyone is price sensitive. We went through this period of inflation which has now changed – we are starting to see some deflation, which we are happy to see – but as price sensitivity increased, everyone was looking for value.

According to the latest data from the US Bureau of Labor Statistics, prices for some food items have actually started to decline. For example, October data showed that prices of dairy products and non-alcoholic beverages declined, while the price of gas also declined by 4.9%. Overall, this means that the change in the consumer price index from September to October was exactly zero.

Amazon echoes Walmart’s comments

Walmart isn’t alone in its comments: Amazon CEO Andy Jassy said his team has seen similar trends from the top of the online tree, and he’s confident consumers will continue to turn to them for essentials.

“Consumers are still spending,” Jassi said in an interview with CNBC this week. “They are being careful about what they spend on, and they are looking for bargains and deals wherever possible. “Wherever they can reduce prices, they’re trying to do that.”

Despite the consumer price index falling below some ranges, inflation is still above the Fed’s target of 2%; It was 3.2% in October. And yet, Jassy said, consumers remain resilient.

In fact, it would take a big enough increase to stop them from buying essentials: “I think people are going to buy some retail items,” he said. “A lot of bad things have to happen before people stop investing in detergents and shampoos and soaps. If you look at our consumables business, the growth rate is extraordinary.”

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