Walmart believes that consumers have suddenly become unpredictable, and that belief is making the retailer more cautious about its short-term strategy, said Walmart CEO ( CEO Doug McMillon said.
Despite strong third-quarter numbers, Walmart struggled through October before rebounding in November.
McMillon said grocery prices are trending downward in areas such as dairy, poultry and seafood, a trend that will put more unit price pressure on Walmart going forward. In fact, McMillon said he believes the United States may soon enter a period of deflation.
Walmart also expects U.S. same-store sales to peak next quarter and then decline for the next three quarters.
Walmart also cited another reason for taking a more conservative approach in the coming months. Americans cut back on spending in October after six months of increases, according to the U.S. Department of Commerce.
Analysts have been watching recent earnings reports from both Walmart and Target as a way to predict how the holiday season will pan out. If so, Walmart’s cautious approach doesn’t necessarily bode well for freewheeling holiday spending.
Walmart stock fell more than 6% following third-quarter results that included a 4.9% year-over-year increase in U.S. comparable sales and a 24% increase in U.S. e-commerce transactions.
Sam’s Club’s comparable sales increased 3.8% and membership increased 7.2% compared to Q3 2022.
Total revenue was $160.8 billion, an increase of 5.2% year over year, and consolidated operating income increased more than 130% to $3.5 billion.
“We saw strong sales growth in each segment during the quarter and are excited to get an early start to the holiday season,” McMillon said. “Looking to the future, our inventory is in good shape, our team is focused, and our employees are ready to serve our customers and members.”
John David Rainey, Walmart Chief Financial Officer, said: CNBC Consumers keep an eye on their budgets, which means they’re putting more money into big promotions. This retailer experienced a decrease in the number of purchases before and after the sales event. The same pattern could be seen with upcoming holiday events like Black Friday.
Things will improve in the coming months, as Walmart announced in late October that it would spend more than $9 billion to upgrade and modernize its 1,400 stores across the United States.The new look is already being tested at the concept stage
With stores in several Walmart Supercenters, Walmart reports same-store sales at these “stores of the future” are up several percentage points. At his one store in Teterboro, New Jersey, same-store sales increased by his 20%.
“These construction investments will create more jobs locally and give our employees more access to what our customers want, when they want it,” Walmart said in a statement.