Doug McMillon, chief executive officer of Walmart Inc., during a panel session on day two of the World Economic Forum (WEF) in Davos, Switzerland, on Wednesday, Jan. 18, 2023.
Stefan Wermuth | Bloomberg | Getty Images
Holiday shoppers are turning to Walmart for groceries and gifts, but CEO Doug McMillon said it’s hard to predict how sales will look within the months after the height shopping season.
In an interview with Sara Eisen that aired Wednesday on CNBC’s “Squawk on the Street,” the leader of the world’s largest retailer said higher bank card balances and dwindling household bank accounts raise questions about how much consumers will spend — even after they showed more resilience than expected this 12 months.
“If we had been talking last spring or at the start of last 12 months, I expected more softness by this time of the 12 months than we’re actually experiencing,” he said. But, he added, “next 12 months’s a unique story.”
Deflation in some items is making a latest dynamic for Walmart, McMillon said. Usually merchandise, the category that features electronics, toys and other non-food items, prices have dropped by about 5% compared with a 12 months ago, he said.
For instance, this holiday season Walmart has 25 toy items under $25, including a Hot Wheels automobile for $1.18, McMillon said.
Prices in food categories are about where they were a 12 months ago, though fresh foods are likely to fluctuate, he said.
He said the corporate has seen the quantity of its non-food sales “start to come back back.” Back-to-school helped drive a few of that rebound.
“It’s gonna be interesting to observe what happens in the final merchandise categories within the 12 months ahead because prices are a lot lower,” he said.
Walmart has stood other than many other retailers over the past 12 months, as its large grocery business and low-price fame have propped up its revenue and stock price during a period when retail sales have weakened. As of Tuesday’s close, Walmart shares had climbed nearly 10% this 12 months, they usually hit an all-time high in mid-November.
The discounter gave a lower-than-expected full-year forecast in November, but unlike Goal, Macy’s and other retailers, it projected sales growth. Walmart expects consolidated net sales will rise 5% to five.5%, and adjusted earnings per share shall be $6.40 to $6.48 for the fiscal 12 months.
Deflation — or falling prices — will bring tough comparisons for Walmart and other retailers. If each item costs less, corporations may have to work harder to sell more items.
McMillon said he’s confident Walmart can drive growth, even in that environment. And, he said, shoppers need pressure on their budgets to ease, too.
Despite the challenges deflation would create for Walmart, “we might reasonably have lower prices than higher prices,” he said.