Mark Heppenstall, CIO of Penn Mutual Asset Management, joins “Mornings with Maria” to share his perspective on several headlines about the U.S. economy.
Retailers have launched many offers in recent months to attract customers and boost sales. And it’s working.
Two of the largest retailers, Target and Walmart, recently reported an increase in customer traffic due to price cuts over the past few months.
On Wednesday, Target CEO Brian Cornell told analysts during a conference call that the company had cut prices on about 5,000 frequently purchased items in many markets over the summer. In return, the company saw “an acceleration” in unit and dollar sales growth in those business areas in the second quarter, the three-month period ended June 30, Cornell said.
Walmart beats Wall Street expectations and improves forecast with higher grocery discounts
“We are very pleased with the consumer response to our pricing investments on these 5,000 frequently purchased items,” Cornell said.
Both the company’s food and beverage and essential categories saw an increase in customer traffic during the quarter, demonstrating how “consumers are responding to our offerings in an environment where they are focused on value,” Cornell said.
He did not comment on whether there would be further price cuts in the third quarter.
A customer at the self-checkout line of a Target store in the New York City borough of Queens, USA, on Tuesday, May 16, 2023. (Bing Guan/Bloomberg via Getty Images / Getty Images)
In the last quarter, Walmart US also implemented more than 7,200 price cuts across all categories. This includes a 35% increase in price cuts on groceries, which is particularly problematic for households.
Rollbacks are a temporary reduction in the prices of goods.
In its U.S. segment, the company generated net sales of $115.3 billion in the quarter. Sales at stores open at least a year increased 4.2%, primarily due to strong customer traffic. The company also reported an increase in transactions, sales and market share gains in the grocery category.
Walmart wins high-income shoppers as high prices persist
CEO Doug McMillon hinted that the company would further reduce prices on certain goods. He said the company would “continue to work to implement additional price reductions to help customers and members save money.”
Walmart is currently the largest retailer in the United States and the world. (David Paul Morris/Bloomberg via Getty Images / Getty Images)
Economists say the rise in retail sales in mid-summer was partly due to retailers’ special offers.
| ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| TGT | TARGET CORP. | 159.25 | +16.04 |
+11.20% |
| WMT | HOLDINGS INC. | 75.24 | +0.70 |
+0.94% |
“July’s retail sales reflect the strength of the economy, which continues to expand despite pressures on growth,” said Jack Kleinhenz, chief economist at the National Retail Federation (NRF). “Households continue to spend moderately, benefiting from falling retail prices, although prices for services are still high.”
Last month, core retail sales as defined by the NRF – which is based on census data but excludes auto dealers, gas stations and restaurants – rose 0.4% month-on-month on a seasonally adjusted basis.
The Target store in the 1900 block of Scenic Highway in Snellville (Google Maps / Google Maps)
GET FOX BUSINESS ON THE GO BY CLICKING HERE
In the first seven months of the year, core retail sales increased 3.4% year-on-year, in line with the NRF’s forecast of 2.5-3.5% growth in retail sales in 2024 compared to 2023.
“Even as labor force growth slows, consumer spending remains the backbone of the economy, keeping expansion on a positive trajectory. We are all waiting to see which direction the Fed will take with its interest rates,” Kleinhenz said.
