Walmart CEO Doug McMillon said in an interview with CNBC on Wednesday (Dec. 6) that the retailer expects consumers to seek out sale items during the Black Friday and Cyber Week sales periods. However, consumption is likely to slow until Christmas approaches.
He said all shoppers have become more “price sensitive” over the past year and continue to seek the best value.
“Consumers are prioritizing their orders and we know that prices can be lower on clearance just before Christmas and after Christmas,” he said.
McMillon said it’s difficult to predict what next year’s sales will be after the holiday season due to rising credit card balances and shrinking household bank accounts. He said shoppers have always looked to Walmart for value and deflation in categories such as toys and electronics. He said prices in most of these categories are about 5% lower than they were a year ago.
He also said consumers are buying fewer general goods as more of their household budgets go toward consumables and services, where prices remain high.
“It’s going to be interesting to see what happens over the next year in the general merchandise category because prices have come down significantly,” he said.
He said consumers are looking for lower prices across the board, and Walmart would rather operate in a low-price environment than an inflationary one, even though it’s harder to compare if coming from an inflationary period. said. Lower prices mean that Walmart and all retailers must sell more units to generate comparable profits.
McMillon also talked about the growing advertising and financial services platforms that generate revenue at double-digit growth rates, giving retailers more options to grow revenue even if consumer spending on goods slows in 2024. He said he is offering many avenues.
McMillon said that by this time in 2023, the situation will be even softer than what we are currently experiencing. He doesn’t expect the U.S. to fall into a recession, but said consumers’ cautious spending is likely to continue.
When asked about changes in consumer spending related to a new class of prescription weight loss drugs like Ozempic, which is currently taken by more than 5.6 million U.S. consumers, McMillon said the retailer is offering more Although there are some baskets where fresh food sales are high, he said that this is the current situation. It is currently too early to predict long-term changes in shopping behavior.
He said that while the share of private labels at Walmart has increased as a percentage of total share over the last year, he would like to see product manufacturers work more with retailers to increase the value and volume of iconic brands. is a characteristic of Walmart. In other words, he wants more consumer goods companies to lower prices.
McMillon said fresh produce prices tend to fluctuate, and overall food prices are close to where they were a year ago.
Walmart’s McMillon said the company, the nation’s largest private employer, has reduced hiring of seasonal workers as its full-time workforce normalizes from the pandemic. He said Walmart is at full employment and wages could rise slightly next year, but not as much as in past years.
Walmart expects consolidated net sales to increase 5% to 5.5% and adjusted earnings per share to be $6.40 to $6.48 for the fiscal year ending Feb. 1. Walmart stock (NYSE: WMT) traded down $1.46 to $154.27 on Wednesday morning. heavy volume. Over the past 52 weeks, the stock has traded between $136.09 and $169.94.