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‘Stubborn’ Food Inflation Makes U.S. Shoppers Cut Back on Purchases of Other Goods

Retailers like Target (TGT.N) are being forced to slash prices on everything

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Sadaf Hasan
Sadaf Hasan
Aspiring reporter covering trending topics

UNITED STATES: As American consumers stomach rising food prices, they are reducing purchases of other goods like toys, housewares, and clothing, which is a challenging trend for retailers.

This week, executives from Walmart (WMT.N) and other retailers provided commentary demonstrating how Americans are changing their buying habits and looking for deals in the face of the highest inflation in a generation.

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Americans are still spending money, but they are more “choiceful, discerning, and thoughtful” about what they purchase, said Doug McMillon, the global chief executive officer of Walmart, the largest retailer in the world by revenue.

Walmart’s most recent quarter saw soft apparel, toys, electronics, and home goods sales due to higher food costs. McMillon predicted that “for a while,” inflation would stay high for dry goods and goods intended for immediate consumption.

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Data from the Labor Department revealed that the average cost of food eaten at home increased by 11.3% in January compared to last year. That represented one of the largest differences since the 1970s, nearly five percentage points above the general inflation rate. For almost a year, price rises in the food industry have exceeded general inflation.

John Furner, CEO of Walmart in the U.S., said, “food inflation has been the most stubborn of all the categories.”

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Between 2022 and 2030, Coresight Research forecasts a $500 billion increase in yearly grocery retail sales. Retailers like Target (TGT.N) are being forced to slash prices on everything from toys to electronics due to sharp revenue declines in categories besides food.

Investors stated that Walmart could withstand the competition better because it generates a larger portion of its revenue from groceries than other retailers.

While groceries make up 56% of Walmart’s revenue, they only account for 20% of Target’s, focusing more on home furnishings, clothing, and beauty products.

Estimates predict that Target’s fiscal year-end sales will increase by 2.7%, significantly less than Walmart’s 6.7% increase, which will be announced on February 28.

Home goods retailers are under pressure; according to Coresight, which uses data from the U.S. Census Bureau, sales of home goods and home improvement products, including gardening supplies, will account for just 11% of all retail sales in 2022, down from 15% in 2017.

According to the company’s CEO, Edward Decker, consumers spent less at Home Depot (HD.N) on items like soft carpeting and roofing in the most recent quarter.

In 2022, sales at TJX’s (TJX.N) HomeGoods division fell 11%. TJX is an off-price clothing and homeware retailer. On Wednesday, Ernie Herrman, CEO of TJX, said to analysts, “We’re still trying to figure out the home trend nationally.”

Since Lowe’s tends to attract more DIY customers than inflation-resistant professional builders and contractors. Lowe’s Companies Inc. (LOW.N), which reports on March 1, could feel the pinch more than larger competitor Home Depot.

In March, when specialty retailers like Kohl’s (KSS.N), Nordstrom (JWN.N), and Victoria’s Secret & Co. (VSCO.N) report quarterly results, Wall Street will learn more about the effect of inflation on clothing sales.

Also Read: Spain’s Unemployment Rate Spikes up to 12.67% in Q3 Amid High Inflation


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