Consumers Are Spending More On Food, So Walmart And Home Depot Are Making Cautious Predictions
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While inflation has eased in recent months, it remains high and could have a mixed impact on spending as rising prices push sales figures up. Consumer habits were putting pressure on profits. Holiday sales are weaker than expected as shoppers prioritized spending on food and other essentials.
Sales situation in the US
US holiday sales in 2022 rose 5.3% to $936.3 billion, below the forecast released last year by the National Retail Federation. In January, retail sales rose 3% from the previous month, the biggest monthly increase in almost two years.
Walmart and Home Depot
Walmart and Home Depot have enjoyed high sales for the better part of the last two years as people are looking for a bargain or repairing their homes. Now with more budgets, consumers are spending more on food and less on electronics, clothing and home improvements as inflation and changing habits reduce the demand for many goods.
For Home Depot, which mainly sells home improvement items, this momentum meant steady sales in the last quarter. For Walmart, which relies on groceries for the majority of its sales, this meant a greater-than-expected increase in sales. But executives at both companies said consumer habits were putting pressure on profits and offered a muted outlook for the rest of the year amid economic uncertainty.
Walmart’s sales
Walmart said comparable US sales, that of stores and digital channels operating for at least 12 months, rose 8.3% in the quarter ended Jan. 27, compared to the same period a year earlier. It beat analysts' expectations.
December was the month with the highest sales volume in the retailer's history, the company said. Sales of some non-food items fell in the last quarter as shoppers prioritized spending on daily necessities.
Walmart also cut many items to relieve overstock last year. The company's U.S. inventory fell 2.6% in the quarter, but is still up in some categories, such as apparel.
Walmart expectations
The retailer said it expects comparable US sales to grow 2% to 2.5% for the full year. Walmart expects US inflation to stay roughly at current levels this year.
Home Depot
Home Depot customers were less sensitive than expected to higher prices throughout 2022.
The company reported revenue of $35.83 billion for the fiscal fourth quarter that ended Jan. 29, about the same as a year earlier and less than the $35.97 billion expected by analysts.
Home Depot set a cautious tone on Tuesday. Last quarter sales fell slightly after years of pandemic-driven growth. The home improvement retailer said sales this year will be flat.
Labor market
Job growth accelerated at the beginning of the year. Employers added more than half a million jobs in January and the unemployment rate hit a 53-year low.
Both Home Depot and Walmart are navigating a tight labor market for hourly workers, driving up costs.
On Tuesday, Home Depot said it would invest $1 billion to raise wages for its hourly workers. Walmart last month said all US workers would be earning a starting wage of $14 an hour, down from $12.
Walmart share price
After Walmart's prices fell in mid-February, they rose for several days. Walmart shares closed 0.6% higher on Tuesday at $147.33.
Home depot share price
Home Depot shares have been above 300.00 for the last three months. HD shares recently traded against Walmart shares, and the company's shares fell 7.1% to $295.50.
Source: wsj.com, finance.yahoo.com
