As concerns about inflation causes American consumers to choose cheaper products and smaller quantities, discounter Walmart is managing to attract more well-off customers.
Higher incomes
American consumers are paying more and more attention to the little things, opting for smaller packaging and buying products such as canned tuna and beans instead of beef, finance director John David Rainey told CNBC. They are also opting more often for payment by credit card instead of regular debit card.
Consumers are put off by higher prices for energy, food and housing, which is good news for discounters like Walmart. The retailer is attracting new customers from higher income groups, and thus gaining market share. As a result, the company is presenting quarterly figures that defeated forecasts.
Limited profit decrease
Walmart’s stores in the United States saw their comparable sales increase by 6.5 % in the second quarter. Sam’s Club even increased by 9.5 % and never had more members. E-commerce grew by 12 %. However, operating profit decreased by 6.8 % due to price discounts, lower demand for high-margin products (such as electronics and apparel) and higher labour costs.
All in all, analysts say the quarterly results are rather reassuring, after last month’s shocking profit warning that negatively impacted just about the entire retail sector. Walmart now expects full-year earnings to decline by 9-11%, slightly better than the 11-13% previously forecast.
