Walmart CEO Doug McMillon said Wednesday (Dec. 6) in a CNBC interview that the retailer expected consumers to seek out deals during the sales of Black Friday and Cyber Week but spending would likely slow until closer to Christmas.
He said all shoppers have become more “price sensitive” this past year and continue to look for the best values.
“Consumers are prioritizing their orders, and they know there’s a chance that prices might be lower right before Christmas or after Christmas with clearance,” he said.
McMillon said it’s hard to predict how sales will look next year following the holiday season because of rising credit card balances and shrinking household bank accounts. He said shoppers have always looked to Walmart for value and deflation in categories like toys and electronics. He said prices in those categories are mostly lower than a year ago by about 5%.
He also said consumers are buying less general merchandise as more of their household budgets are going for consumables and services where prices remain elevated.
“It’s gonna be interesting to watch what happens in the general merchandise categories in the year ahead because prices are so much lower,” he said.
He said consumers need lower prices overall, and Walmart would rather operate in a lower-price climate than an inflationary one, even though it makes comparisons tougher when coming from inflationary periods. Lower prices mean Walmart and all retailers have to increase unit sales to generate comparable revenue.
McMillon also spoke about the growing advertising and financial services platforms that generate revenue at double-digit growth rates providing the retailer with more ways to grow revenue even if consumer spending on goods slows in 2024.
McMillon said he thought there would be more softness by this time of 2023 than what is being experienced. He does not expect the U.S. will slide into a recession but said consumers’ cautious spending is likely to continue.
When asked about the shift of consumer spending related to the new class of prescription weight-loss drugs like Ozempic, now taken by more than 5.6 million U.S. consumers, McMillon said the retailer has seen some baskets with more fresh food sales over processed foods but that it’s too early to predict any long-term shopping behavior changes at this time.
He said private brand share at Walmart increased as a percent of the total share last year, but he would like to see product manufacturers working more with the retailer to drive more value and volume for their iconic brands because that is what Walmart is known for. In other words, he wants more consumer products companies to lower their prices.
McMillon said prices of fresh foods tend to fluctuate food prices overall are about where they were a year ago.
As the nation’s largest private employer, Walmart’s McMillon said the retailer hired fewer seasonal workers because its percentage of full-time employees has normalized from the pandemic. He said Walmart is fully employed, and wages could rise slightly next year, but not to the extent of the past few years.
Walmart expects consolidated net sales will rise 5% to 5.5%, and adjusted earnings per share will be $6.40 to $6.48 for the fiscal year ending Feb. 1. Walmart shares (NYSE: WMT) traded lower on Wednesday morning at $154.27, down $1.46 in heavy volume. Over the past 52 weeks, the shares have traded between $136.09 and $169.94.