NEW YORK, Nov 13 (Reuters) – With consumer demand emerging in a mixed bag over the past quarter, earnings reports from Walmart and Target on Wednesday and Thursday, respectively, will give the U.S. retailer a chance to move forward ahead of Black Friday. It will clarify the situation.
After last year’s chaotic holiday season, when inflation peaked, shoppers focused on buying essentials like bread, milk and toothpaste, leaving retailers with large quantities of clothing and electronics unsold. . Wall Street is hoping recent economic data will support food inflation and wage growth. This season, shoppers open their wallets.
But rising credit card debt, depleting pandemic-era savings and rising interest rates have given investors pause and left retail bellwethers like Walmart and Target with a glut of merchandise, forcing them to cut prices during the holiday season. I’m betting that it will.
Walmart investor Sizemore Capital Management told Reuters that Walmart’s previous decision not to hire seasonal holiday workers was a clear sign.
“They don’t expect the (shopper) traffic to be that high right now, so they’re not expecting that much (shopper) traffic right now,” said Charles Sizemore, the company’s chief investment officer, who owns about $2 million each in Wal-Mart and Target stock. That’s how I would interpret it.”
Further evidence of Christmas malaise surfaced as Target CEO Brian Cornell said on Nov. 2 that customers were pulling back on even groceries.
“If people were selective about what they spent their grocery money on, Christmas would be quieter this year,” Sizemore said.
The National Retail Federation predicts that U.S. holiday sales in 2023 will grow at the slowest pace in five years. The holiday shopping season traditionally begins the day after Thanksgiving, also known as Black Friday. However, Walmart and Target began offering holiday discounts in October.
Walmart, which focuses on selling groceries, is expected to see sales rise 4.4% in the third quarter, according to LSEG data. Walmart announced last month that it would offer prepackaged Thanksgiving meals and groceries at lower prices than last year. The company has also begun a $9 billion store renovation plan.
Target, by contrast, is expected to see a 4.8% sales decline. Nearly half of the company’s sales come from clothing, housewares, toys and electronics, according to analysts at TD Cowen and DA Davidson.
Rubbermaid Sharpie maker Newell Brands (NWL.O) and OXO Hydro Flask maker Helen of Troy (HELE.O), whose products are sold at Walmart and Target, said last month that inflation had led to shopping cuts. He said customers were focused on food and essential items. Retailers strictly control their inventory.
Still, Target said shoppers are spending more on July 4th and Memorial Day, and it expects that pattern to continue on Black Friday and the days leading up to Christmas. While Walmart is betting on newly renovated stores, Target is betting on new products, including a collaboration with Ulta Beauty, Kendra Scott jewelry, and Figmint, a new line of Target-owned kitchenware. There is.
DA Davidson analyst Michael Baker said food price inflation hurting discretionary sales “doesn’t seem to be as big an issue this holiday season as it was last year. ” he said.
Reporting by Siddharth Cavare in New York Editing by Nick Zieminski Editing by Nick Zieminski
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