What's going on?
No discounts here: data out on Tuesday showed Walmart’s still bringing in sales despite its swelling prices.
What does this mean?
Looks like Walmart’s been applying its “save money, live better” slogan to its own bottom line: the world’s biggest retailer has been passing inflation-charged costs onto its loyal shoppers, which helped beef up sales from stores open for at least a year by over 8% last quarter from the same time last year. And the fact that the firm’s inventory only grew by 13% – a far cry from the previous quarter’s 25% (tweet this) – will only add to the pre-festive cheer: investors won’t want to see piles of excess stock being sold with heavy discounts during the all-important holiday season, after all. Shareholders’ smiles likely got even wider after Walmart announced a new $20-billion share buyback plan too, rounding out a very good day in the Bentonville office.
Why should I care?
Zooming out: Everyone budgets.
Inflation’s so rampant that even higher-income shoppers are pulling their purse strings that little bit tighter and checking out more budget-friendly stores. In fact, Walmart estimates that around 75% of last quarter’s market share gains came from households with incomes over $100,000. And with fired-up prices sticking around for now, cheap-and-cheerful stores could be in the money for a while longer.
The bigger picture: Being sticky is good.
Thing is, Walmart’s not the only firm with the power to pass rising costs onto its shoppers without putting them off. Quite the opposite, in fact: companies in all sorts of industries are upping their prices, confident that their customers won’t check out their equally-pitched competitors. The question for investors, though, is whether firms can keep their prices steady and sticky if and when cost pressures ease – a more achievable task for businesses with fewer direct competitors and a loyal fanbase.