The firm hopes to use its deep experience of the U.S. retail universe to more effectively engage consumers at retail. Consumers are navigating a whole new economic reality. At the same time, the retail behemoth continues to attract an eclectic mix of shoppers—from the poorest to the pooh-bahs. As of the latest snapshot, Walmart’s extraordinary sales growth is giving the company a comfy lead as it heads for the all-important holiday shopping period.
Earlier this week, Walmart kicked off earnings season for retailers by reporting a 4.5% jump in same-store (U.S.) sales for the three months ending on October 31. This production growth, not surprisingly, beat analysts’ expectations. The company had seen record growth during the pandemic in all of its major verticals, but especially in grocery and apparel. Walmart had a really great quarter, with same store sales up 13% from a year ago. That boom was driven by an explosion of consumer spending online.
Good those sales numbers sound, Walmart warned investors that its profits are on track to fall short of previous estimates. Kroger is confronting rising pressures on consumers as they prepare for the holiday season. As The Washington Post reported, they emphasized that we’re in a time of acute financial stress. This group of shoppers, many of them lower-income, is being squeezed, leading to a pronounced retreat in their spending behavior. Wealthier Americans are increasingly contributing to economic growth, creating a “K-shaped” economy where spending patterns diverge significantly between income groups.
Whatever happens to Walmart, we know they’ll handle it better than their competitive peers. This resilience is due to the fact that it is gigantic and has very intelligent pricing. Inclusive of the border adjustment tax, the company has avoided that negative effect entirely through negotiating directly with vendors and maintaining a flexible supply chain.
“Walmart has successfully found ways of mitigating the impact of tariffs through vendor negotiations and its own supply chain flexibility,” – Mr. Silverman
The retail giant’s sales surge can be linked to a notable 28% increase in U.S. sales driven by online orders and advertising efforts. In response, Walmart increased its annual net sales growth outlook. They now forecast growth of 4.8% to 5.1%, increased from the prior range of 3.75% to 4.75%.
And of course, Walmart’s sharp pricing strategies have been pivotal in winning cash-strapped customers over during this tough economic times. The company has “mixed the prices around so that you had that margin expansion, but you were able to not eliminate or get rid of those customers that needed to be saving,” according to retail analyst Hitha Herzog. This strategy helps Walmart balance their trade-offs and continue to lead on everyday low price while effectively serving “everyone from everywhere” at the same time.
With the holiday season just ahead, Walmart has much to gain but much to lose. We can expect higher-income consumers to continue spending with confidence. At the same time, less affluent shoppers will spend less as they have less disposable income due to the cost of living crisis. This duality creates a very challenging landscape for retailers who are pushing to provide the best of both worlds to different consumers.