The retail giant lost $1.8 billion in the third quarter as U.S. consumers shifted to lower-priced goods
Recently, the retail giant Walmart announced its results for the third quarter of the fiscal year 2023. The total revenue during the period reached $152.8 billion, a year-on-year increase of 8.7%, which was higher than the expected $147.75 billion; the net loss was $1.8 billion, compared with a profit of $3.11 billion in the same period last year.
Walmart Chief Financial Officer John David Rainey said consumers are paying attention to how they spend. They’re buying less expensive proteins like hot dogs, beans, and peanut butter instead of expensive meat. They’re waiting for promotions to buy things like TVs, and they’re spending less on clothing and home categories. “People have less discretionary income, or less discretionary income to spend on shopping, so they’re value-conscious,” Rainey said on a conference call with investors. Spending is also downgrading in other categories, such as buying cheaper baby products and baked goods, including more Walmart private label products. Consumers have changed their spending habits.
Walmart is also attracting more high-income shoppers as inflation rises. About 75% of the company’s growth in food market share has come from households earning more than $100,000 a year. In addition, Walmart has a series of promotions to attract budget consumers, including the typical Thanksgiving shopping basket.
Noticing that consumers are spending less on non-essential items, Walmart reduced prices in July to clear over inventory. The measures taken by the company have achieved initial results, with inventory rising 13% year over year in the third quarter, down from 26% in the second quarter and 32% in the first quarter. Rainey said Walmart has canceled orders, increased markdowns, and cleared a backlog of products at ports, most of which is now in stores. In the third quarter, Walmart US’s comparable sales rose 8.2%, excluding gas. The key retail metric, also known as same-store sales, includes sales at Walmart stores and clubs that have been open for at least a year. Other highlights for Walmart in the third quarter included U.S. e-commerce, which grew 16% year-over-year, and global advertising, which grew more than 30%.
Moreover, Walmart’s international net sales rose 7.1% year-over-year to $25.3 billion, an increase of $1.7 billion, but were negatively impacted by $1.5 billion in currency fluctuations. Its business in Mexico, WalMex, led the way with high growth rates, and growth in China was also strong, ranking first globally in online sales. The fourth quarter could be uncertain. Walmart is coming through a more challenging backdrop as it prepares for the holidays. Inflation is near its highest level in 40 years, pushing up prices for housing, natural gas, and more. Competitors are discounting deeply to clear over inventory. Walmart is more conservative in its expectations for the holiday season. The company said it expects Walmart U.S.’ comparable sales to rise about 3 percent, excluding gas, below Wall Street expectations for a 3.5 percent growth rate. The Walmart chief executive said this year’s holiday season is less predictable and will have more promotions. Consumers are likely to turn to Walmart in late December and January because they are particularly price-sensitive.
