Since 1962, cost-smart consumers have known that anything they need could be found for rock-bottom prices at what has become the primary United States retailer - Walmart. So what happens when Walmart, the bastion of strength for the retail industry, expects hard times? The answer is that everyone begins to prep for hard times. That is precisely what happened this Monday when Walmart announced that its expecting a 11 to 13 percent drop in annual profit for this year. (Person and Cavale, 2022) Overnight, the value of their stock dropped by 10% and other companies like Target and Amazon shortly followed. The culprit is likely the rising inflation and its effects on customers. With prices rising precipitously, consumers are becoming frugal in their spending. In fact, the US Census Bureau reports that "inventories at general merchandise stores at the end of April were the highest since at least 2000." (Census Bureau, 2022) Meaning, that items are no longer flying off the shelves. Additional complications with supply chains have not helped either. Together, U.S. retailers were down more than $100 billion in stock market value. While the short-term and medium term stimulus checks and loans during the pandemic helped keep the economy rolling, the country is experiencing more of the long term ramifications. In order to battle the headwinds, Jerome Powell just announced another move in monetary policy - a 2-2.5% increase in interest. (Bloomberg, 2022)
Do you all think this will be helpful?
Brad
Citations
Bloomberg. (July 27, 2022.). Powell Signals More Fed Hikes Coming. Bloomberg.com. Retrieved July 27, 2022, from https://www.bloomberg.com/news/articles/2022-07-27/powell-signals-more-hikes-coming-leaves-out-details-this-time
Person, & Cavale, S. (2022, July 26). Walmart 'train wreck' profit warning sends shares down 10%. Reuters. Retrieved July 27, 2022, from https://www.reuters.com/business/retail-consumer/walmart-cuts-full-year-profit-forecast-2022-07-25/
Census Bureau (2022).Retail Index. https://www.census.gov/retail/index.html
Walmart and its close rival, Target, have experienced an surplus of inventory with the rise of inflation this year. This has led to a significant amount of discounts to try and get rid of excess. During the pandemic, consumers looked Rostock up on essentials, lockdown hobbies, and home goods. Rob Wile of NBC (2022), writes that "as the economy has reopened and as supply chains have recovered somewhat, retailers have found themselves left with excess merchandise." As the world has opened up again, consumers have shifted their demands, and businesses are trying to catch up and adjust accordingly.
References
Wile, R. (2022, July 26). Walmart is slashing prices to get rid of excess inventory. NBCNews.com. Retrieved September 3, 2022, from https://www.nbcnews.com/business/consumer/walmart-slashing-prices-get-rid-excess-inventory-rcna40033