Wednesday, May 20, 2015

Consumer Mood in the Walmart Report

The quarterly report from Walmart reinforces the thought that U.S. consumers are not in a shopping mood so far this year. Same-store sales were up 1.1 percent from the year before, but groceries were flat and sales at Sam’s Club were down slightly. We would expect lower gasoline prices to make people more willing to drive to local and regional stores for shopping, but the effect is hard to find even after adjusting for unfavorable weather. Walmart CEO Doug McMillon said on the earnings call,

. . . many of our U.S. customers are using their tax refunds and the extra money from lower gas prices to pay down debt or put it into savings.

I have to imagine that part of the shift is that appliances are becoming more durable, so that the occasions that force people to go shopping occur less often. But there is more to it than that. My own Walmart purchase during the quarter, a lawnmower, put me in position to buy a cartload of merchandise while I was in the store already, but it felt simpler and safer to get my one purchase out to the car and drive away. While in the store, I saw more than a few customers carefully comparing items on the shelves but ultimately not selecting anything to purchase. I have to assume these were shoppers who could not find what they went in for and also did not come upon anything compelling to buy.

What if shoppers just stopped shopping? I have yet to make a grocery shopping trip this month. When I think of buying groceries I remember that local produce will be available a few weeks from now. I will get a better deal if I wait. That, of course, is a shopper’s mantra in a period of deflation. Time pressure, debt, and other factors are making shoppers postpone shopping almost the way they would if prices were falling. Retailers have to look for ways to remain relevant.