US retail giant Walmart on November 16 raised its sales and profit forecast for the year while at the same time noting that consumers are being more cautious about spending due to increased borrowing rates, Reuters reported.
Shares in the company fell 7.7 percent on November 16 as Walmart reported “somewhat uneven” sales over the last two months due to higher interest rates and dwindling consumer savings.
The company’s focus on groceries helped protect Walmart from the slowdown in discretionary spending as over half of its merchandise was comprised of food and other essentials.
Walmart CFO John David Rainey told Reuters that the retail giant saw consumers slowing their purchases during the second half of October only to rebound in early November on items like home goods and apparel which have been stagnant for most of the year.
Echoing earlier comments from Target CEO Brian Cornell, Rainey said while Walmart shoppers’ visits increased by 3.5 percent in the third quarter of 2023, consumers are still “using discretion” and holding off until events like Black Friday and Cyber Monday to make holiday purchases.
Target’s sales declined on average about 7 percent in August and September, with many shoppers putting off the purchase of denim or sweatshirts typically bought in those months.
Cornell said while consumers are still spending at Target, the company’s sales aren’t out of the woods quite yet due to higher interest rates on credit cards, the resumption of student loan payments, increased credit card debt, and a drop in household savings, all of which create pressure on consumers to stretch their budgets further.
Consumer spending accounts for approximately 70 percent of the US economy. However, core retail sales rose only 0.2 percent last month as spending declined due to lingering inflation and higher borrowing costs.