Walmart customers behave so strangely that their bosses “sit” – Fortune

Walmart President and CEO Doug McMillon

Doug McMillon, president and CEO of Walmart, said individuals are opting for bargains. Derek White – Getty Images for Operation HOPE, Inc.

The current economic climate has understandably confused consumers, and it appears that major business leaders are equally confused about consumer trends.

US spending forecasts for the remainder of 2023 and into 2024 vary among industry experts.

Bank of America CEO Brian Moynihan claims that shoppers remain relatively stable, while Wells Fargo CEO Charlie Scharf goes a step further, stating that consumers are “still very, very strong.” On the contrary, some experts such as Wharton professor Jeremy Siegel expect a significant decline in consumers after the summer season.

It’s a mix of all of the above, according to Walmart, a useful barometer of U.S. shopping sentiment as a purveyor of everyday and everyday goods. But even Walmart is grappling with the implications for the next 12 months.

Walmart CFO John David Rainey said Wednesday at the Morgan Stanley Global Consumer and Retail Conference that consumers behaved so strangely in October that bosses were “sitting on the edge of their seat.”

Spending patterns in the last two weeks of October were particularly “puzzling” compared to previous months, he continued, although he said he did not mean to be “alarmist” in any way.

Unfortunately for Rainey, Wall Street may already be unsettled. The retailer’s share price has slumped this month, down 7% after a nosedive following the group’s third-quarter earnings announcement.

On the mid-November call, Rainey first pointed to changing consumer behavior, saying, “We’re seeing our customers continue to exercise discretion in finding values ​​they can manage within their household budget.”

This week, Rainey sought to reassure when Portal reported that “anomalous” shopper behavior and deflationary price pressures had not caused Walmart, a $415 billion company, to rethink its long-term plans.

Customers are becoming increasingly price sensitive

Customers may still be spending big – the 2023 Black Friday period broke records after Americans spent $9.8 billion on goods – but people are becoming increasingly wary of price tags on everyday items, said the CEO of Walmart.

On the same day as Rainey’s update, Walmart CEO Doug McMillon sat down with CNBC for a more in-depth discussion about shopping habits. “In general, customers are very sensitive at the moment. They are prioritizing their orders and know that there is a possibility that prices could be lower just before Christmas or just after Christmas due to clearance sales, so we are anticipating that.”

Previously, Wall Street titans said they would see the sharpest slowdown at the lower end of the income spectrum. For example, Citigroup CEO Jane Fraser said earlier this year that “cracks” were beginning to appear among consumers earning less.

McMillon said that’s not the case that Walmart sees, explaining, “Everyone is price sensitive. We went through this period of inflation, which has now changed – we are starting to see some deflation, which we are happy about – but as price sensitivity increased, everyone was looking for value.”

According to the latest data from the U.S. Bureau of Labor Statistics, some food prices are actually starting to fall. Data from October showed that prices for dairy products and soft drinks, for example, had fallen, while the price of gasoline also fell by 4.9%. Overall, this meant that the change in the consumer price index from September to October was exactly zero.

Amazon echoes Walmart’s observations

Walmart isn’t alone in its observations: Amazon CEO Andy Jassy said his team has seen similar trends at the top of the online market and is confident consumers will continue to turn to them for help Essentials go.

“Consumers are still spending money,” Jassy said in an interview with CNBC this week. “They are careful about what they spend money on and look for bargains and offers wherever they can. Wherever they can lower the price, they try to do so.”

Although some categories of the consumer price index are falling, inflation is still above the Fed’s target of 2%; in October it was 3.2%. And yet, says Jassy, ​​consumers continue to be resilient.

In fact, it would take a significant increase to stop them buying essentials: “I think people will buy certain retail items,” he noted. “A lot has to break before people stop investing in detergent, shampoo and soap. If you look at our consumables business, the growth rate is quite extraordinary.”