The state of the economy can be confusing. Consumers, suffering two years of high inflation and navigating a slowing job market, are still spending big—but on store-brand soda, not new refrigerators. That puts Walmart, the company that has made low prices its mantra, in a good position.
The company announced on Thursday that sales at Walmart stores in the US rose by just over four percent to $115.3 billion, beating analysts’ estimates. Its e-commerce business in the US grew by 22 percent.
Many consider Walmart, the largest retailer in the United States, to be a barometer of the state of the American consumer. 90 percent of the U.S. population lives within 10 miles of a Walmart store.
The Commerce Department provided another snapshot of consumer sentiment on Thursday with data on nationwide retail sales. Sales in July were stronger than economists expected, rising 1 percent from the previous month. The increase outpaced inflation during the period and reinforced the notion that consumers remain resilient, albeit more selective in their purchases.
At Walmart, sales rose 3.6 percent in the quarter, while the average amount spent per visit increased slightly, by 0.6 percent. That combination is relatively rare among retailers lately: Many have observed that price-conscious shoppers are shopping less, or spending less per visit, or both.
Notably, the company raised its full-year sales and profit forecast, a sign of its optimism about attracting more shoppers. It said it had gained market share among consumers across all income brackets, with the wealthiest households again “primarily” driving those gains.
Walmart said that while it remains committed to low prices for its wide variety of products, it is also investing in technology to improve its supply chain and e-commerce operations to make shopping easier and faster for its customers.
““They want value,” Walmart CEO Doug McMillon said on Thursday in a conference call with analysts. “They want a wide range of items and services. They want a convenient and enjoyable shopping experience.” Sales were “fairly consistent” throughout the quarter, he said. “So far, we’re not seeing any weaker consumers overall,” McMillon added.
For one in three online orders, customers pay a surcharge for a delivery time of less than three hours. “If the consumer was that stressed, we probably wouldn’t see this behavior,” said John David Rainey, Walmart’s chief financial officer, in an interview.
But trying to predict the economic future based on Walmart’s results could paint a distorted picture, says Steven Shemesh, retail analyst at RBC Capital Markets. It was a “really strong quarter for Walmart, but I don’t necessarily think that’s a good thing for the economy,” Shemesh said. “People are looking for value, and instead of going to Target, Kroger or wherever they shop, they’re now going to Walmart for at least some of their shopping.”
Walmart’s stock closed more than 6 percent higher on Thursday. The company’s share price, which has hit a series of record highs recently, has risen more than 30 percent this year, about twice the gain of the S&P 500 index.
Other recent economic statistics suggest that consumers may be feeling some relief from the price increases. On Wednesday, data showed that consumer price inflation cooled in July, with headline inflation coming in at 2.9 percent on an annual basis, the first reading below 3 percent since 2021.
Executives of major retail chains have said they continue to monitor the impact of inflation and high interest rates on shoppers.
Higher interest rates have particularly weighed on the housing market, as homeowners with cheap mortgages are reluctant to move and would-be homeowners are deterred by high housing prices. People appear to be putting off major renovation projects, perhaps because they are waiting for the Federal Reserve’s expected rate cut next month. Furniture sales fell 6.2 percent in the first seven months of the year, according to the Commerce Department.
“I think people just paused during the quarter,” Home Depot CEO Ted Decker said on a conference call with analysts Tuesday, citing “macroeconomic uncertainty” as a factor. Home Depot saw a nearly 6 percent decline in sales of items costing more than $1,000 or requiring financing, the company said this week.
Companies are also finding that consumers remain cautious when it comes to everyday purchases.
Executives at PepsiCo, which raised its prices by double-digit percentages in 2022 and 2023, recently announced that they plan to lower prices on salty snacks and some other products and offer more special offers.
Executives at Kellanova, the maker of Cheez-It crackers and Pringles, said consumers who earn $100,000 or less and have children are especially price-sensitive when shopping at the supermarket. Kellanova, which announced this week that it has agreed to be acquired by M&M maker Mars, has been stepping up its promotional efforts to attract more shoppers to branded products.
Amazon reported an increase in North American sales this month but said growth is slowing. Amazon Chief Financial Officer Brian Olsavsky said consumers are gravitating toward cheaper products and those that are delivered quickly.
Vice President Kamala Harris will call for a nationwide ban on corporate price gouging in the grocery industry in a speech outlining her economic agenda on Friday, campaign officials said, seeking to blame major corporations for the rising cost of staple foods that is weighing on the Biden administration’s approval ratings and is a key target of Republicans ahead of the November election.
