You know the economy is in tough shape when a Walmart parking lot is loaded up with Mercedes-Benz, Range Rovers, Teslas, and other high-end vehicles.
That’s the scenario these days as consumers of all demographic stripes – even the most affluent – are looking to cut costs wherever they can as prices for goods and services remain stubbornly high.
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As usual, the data tell the story.
U.S. consumer sentiment, measured by the University of Michigan's index, slid to 57.7 in May from 63.5 in April, as Americans showed “a notable darkening in the outlook for an economy (which) is showing increasing cracks in its foundation,” according to Plante Moran Wealth Management in a May 12 research note.
“After steadily increasing from its summer trough that coincided with the June peak in inflation, consumer sentiment has been gradually eroding since February,” said Jim Baird, chief financial officer at Plante Moran. “Elevated interest rates, along with fundamental worries in the regional banking sector, have contributed to a pronounced tightening in credit conditions.”
Good News for Walmart
That’s good news for big-box retailer Walmart, (WMT) which just released its second-quarter financial results, showing a 7.4% uptick in revenue.
Walmart’s Q2 revenue rose to $152.3 billion, which bested the FactSet consensus estimate of $148.94 billion.
Analysts point to Walmart’s ability to consistently offer low prices, which is welcome news at a time when household budgets are strained, tax refunds are largely spent, and high inflation remains a nagging economic factor for shoppers.
Walmart also reported that it's expanding its market share in food, beverage, and household goods, thanks in part to high-income shoppers as “younger and better off shoppers” are pivoting to Walmart to save money, according to The Wall Street Journal.
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High-end shoppers are more likely to hunt for low prices online, which helps explain why Walmart’s Q2 e-commerce sales rose by 27% in the second quarter.
Citing data from Numerator, The Journal noted Walmart’s U.S. grocery market share grew 1.5 percentage points to 25.1% in the first quarter of 2023 compared with the 2021 period. That’s higher than the gains seen by Albertsons, Costco, and Aldi over the period – all favorite grocery chain haunts of more deep-pocketed consumers in more robust economic times.
Efforts to upgrade the Walmart and Sam’s Club network of superstores also seem to be paying off with amenity-seeking, tech-savvy shoppers.
On its Q2 conference call, Walmart Chief Financial Officer John David Rainey said customers were embracing the restorations of the superstores, complete with wider aisles, more high-end brand products, and digital checkout and customer service displays.
“We’re very encouraged by the early reads on customer response to these initiatives and we plan to update 300 stores with these features this year,” Rainey said.
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