Walmart's Q4 Earnings Reaffirm Shoppers Are Focused On Necessities Amid A Looming Recession
When Walmart reported its 2022 fourth-quarter earnings recently, the announcement revealed some significant insights about the current situation of today's consumers. The store's revenue for the past holiday quarter was predicted to reach around $159.72 billion (via CNBC). The company's actual revenue from this period was $164.05 billion, which represents an increase of 7.3% compared to the earnings report from the same quarter last year.
This increase is good news for those who are looking for signs of an economy that is gaining strength after a year of being battered by the rising prices of inflation. However, even though shoppers were willing to spend more than was expected over the holidays, the report also contained a significant insight into why this information isn't a sign of a big spending spree in 2023.
Despite the successful holiday shopping season, Walmart is cautioning that its sales for the upcoming year are going to be lower than the 3% growth rate that the analysts are anticipating. Walmart has announced that it expects sales to grow at a rate that is closer to 2% or 2.5% instead. This lower prediction stems from the fact that Walmart expects shoppers to focus their spending on necessities such as food and other grocery items, instead of splurging on discretionary goods that were popular in the past, like televisions, exercise equipment, or appliances.
Stretching the budget
As prices of goods continue to rise, simply buying groceries is requiring a larger percentage of a household budget. This reality has driven more people to Walmart than ever before, in order to take advantage of the lower prices on food and other necessities. Walmart's CFO, John David Rainey, states, "The consumer is still very pressured," he says. "And so that's why we take a pretty cautious outlook on the rest of the year."
Another reason for Walmart's conservative prediction about consumer spending is that its stores are facing the same challenge that a host of other retailers are grappling with right now: excess inventory in their warehouses. As shoppers have turned away from luxury items and focused on purchases of everyday goods, these other items are accumulating in storage. It's a sign of what's to come this year as customers save their paychecks to pay for everyday products, and it underscores their priorities in spending, per CNBC. Steph Wissink, a retail analyst for Jefferies Financial Group, sums up the situation by observing, "This is a sneak peek inside the challenges and the decision-making that's happening inside of the household."