With the holiday season in full swing, customers are flocking to Walmart for not only everyday groceries but also festive shopping. But amid a surge in holiday sales, CEO Doug McMillon has expressed doubts about the company’s sales outlook for the coming months.
McMillon appeared on CNBC’s “Squawk on the Street” to discuss the future of retail, highlighting the difficulty of predicting sales in the aftermath of this peak shopping period. Mixed signals from rising consumer debt and declining savings cast doubts on future spending patterns. Interestingly, however, the CEO acknowledged that the resilience shown by consumers this year exceeded initial expectations.
McMillon recalled his thoughts earlier this year, confessing that he expected the market to be even weaker than the one currently experiencing. But he suspects that dynamic may change next year. An interesting trend in Walmart’s recent performance is deflation in some product categories. Prices in non-food categories, such as electronics and toys, were down about 5% from a year ago, McMillon said.
“If we were talking last spring or early last year, we would have expected it to be even softer than we are actually experiencing at this time of year.”
Walmart CEO David McMillon, via CNBC
McMillon highlighted the impact of this trend, noting that Walmart is offering 25 toys for under $25 this holiday season, including Hot Wheels cars priced at $1.18. While overall food prices are broadly consistent with the previous year, fresh food prices have shown greater fluctuations.
Despite the price decline, Walmart has seen a steady recovery in non-food sales, helped in part by back-to-school shopping activity. With prices falling further, McMillon said the performance of the general merchandise category next year should be watched closely.
Throughout the past year, Walmart has carved out a niche within the retail industry. The company’s important grocery division and its reputation for affordability are driving earnings and stock prices higher, even as broader retail sales have declined. This resiliency is reflected in the nearly 10% rise in Walmart’s stock price, which peaked in November.
Unlike competitors like Target and Macy’s, Walmart’s full-year outlook in November predicted sales growth, albeit at a lower-than-expected level. For the fiscal year, the company expects consolidated net sales to increase 5% to 5.5% and adjusted earnings per share to be in the range of $6.40 to $6.48.
Walmart remains confident in its growth prospects in a retail market where deflation requires the company to sell more items to maintain profit levels. At the same time, McMillon empathizes with consumers and recognizes the need to alleviate the financial burdens they face.