Inflation, end of stimulus checks take their toll on Target, Walmart

Target and Walmart are feeling the pain of rising inflation and a lack of stimulus checks, leaving low- and middle-income Americans with little money to spend at the two retail chains’ stores.

In recent years, Target and Walmart have had their best and their worst. The best times were in the second half of 2020 and early 2021, when unemployed Americans got their hands on big bucks during the pandemic lockdowns through unprecedented fiscal stimulus.

In many cases, Americans ended up with more personal income than they would have earned if they worked full-time for minimum wage. That’s how much personal income increased during the pandemic recession. Additionally, stable food and energy prices have allowed low- and middle-income Americans to spend more than their necessities at everyday discount stores like Walmart and Target.

The worst times have been the past six months, when Walmart’s customers took a double hit. First came the end of lockdowns and stimulus checks as many Americans returned to work. However, the paychecks have not been enough to replace the pandemic stimulus checks. Additionally, personal income has been growing at a slower pace these days than it was when the stimulus checks were mailed, according to the US Bureau of Economic Analysis.

Then came rising food and energy inflation, which smashed family budgets and further restricted the ability of low- and middle-income Americans to buy any item they wanted. That’s bad news for Target and Walmart, which are counting on these two groups for growth.

In June, Target sent shockwaves through Wall Street by warning of a significant drop in sales and earnings and significant rebates to liquidate excess inventory of discretionary items. On Monday afternoon, Walmart lowered its sales and earnings estimates, sending Wall Street another round of aftershocks. As with Target’s announcement in June, Walmart cites rising food and energy prices for the revisions.

“Rising food and fuel inflation is affecting customer spending, and while we’ve made good progress eliminating hardline categories, apparel at Walmart US requires more discount dollars. We now expect more pressure on general merchandise in the back half; however, we are encouraged by the take-off we are seeing in school supplies at Walmart US,” said Doug McMillon, Walmart’s president and CEO, in a press release.

Still, some good news is buried in the bad news from the two retailers. For example, merchandise discounts are one of the ways to reduce inflation and drive traffic back to stores. It’s already happening, according to a new white paper from pedestrian analytics company Placer.ai. The Halfway Point Lessons – July 2022 whitepaper predicts that the second half of the year could get better for the country’s retailers.

Bottom Line: Don’t bet against Target and Walmart, no matter how bad things look. They always find their way back over the long term, even if their earnings and stocks take a big hit in the short term.

https://www.ibtimes.com.au/inflation-end-stimulus-checks-take-their-toll-target-walmart-1834791?utm_source=Public&utm_medium=Feed&utm_campaign=Distribution Inflation, end of stimulus checks take their toll on Target, Walmart

Fry Electronics Team

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