Walmart CEO: Next Year’s Spending Patterns Tough to Forecast

Walmart’s CEO says it’s difficult to project what the retailer’s post-holiday sales will look like.

Speaking with CNBC Wednesday (Dec. 6), Doug McMillon said that higher credit card balances and reduced household budgets have called into question how much consumers will spend, despite their recent resilience.

“If we had been talking last spring or at the beginning of last year, I expected more softness by this time of the year than we’re actually experiencing,” he said, adding that “next year’s a different story.”

The chief executive told CNBC’s “Squawk Box” that deflation has added some new wrinkles, as prices for general merchandise — things like toys and electronics — are down 5% since last year, while food prices are about the same as at this point in 2022.

McMillon said Walmart’s volume of its nonfood sales have begun to come back, helped along with back-to-school shopping.

“It’s going to be interesting to watch what happens in the general merchandise categories in the year ahead because prices are so much lower,” he said.

Last month, Walmart reported quarterly earnings that “showed a cautious outlook on consumers’ willingness to open their wallets into the holiday shopping season after the quarter’s end, investors sent the shares tumbling more than 7%.”

Chief Financial Officer John D. Rainey said during a conference call with analysts that, “recently, we’ve experienced a higher degree of variability in weekly performance in between holiday events in the U.S., including seeing a softening in the back half of October. It was off trend to the rest of the quarter.”

He added that “sales have been somewhat uneven, and this gives us reason to think slightly more cautiously about the consumer versus 90 days ago.”

As for where and how consumers are spending during the holidays, the report “The Credit Economy: How Consumers Are Approaching Holiday Spending and Travel,” a PYMNTS Intelligence and i2c collaboration, showed that consumers planned to reduce spending by 26%.

“But the trimming, so to speak, relates to non-gift-giving activities, where a pullback on live entertainment and spending on oneself (rather than others), would make room for spending on loved ones and acquaintances,” PYMNTS wrote this week.

Drilling down, the spending target had been $860 on non-gift holiday purchases, compared to $1,160 in 2022, while spending on gifts was expected to climb to $1,000.