Walmart's results announcement next Tuesday will provide Wall Street with new details on what items American shoppers are buying as rising grocery prices squeeze their wallets.
The world's biggest retailer, with more than 5,000 U.S. stores, is expected to post a roughly $7 billion (€6.58 billion) rise in sales for the fourth-quarter ended January 31, up 4.5%.
Higher-income shoppers in recent months have been drawn to its 'Everyday Low Price' strategy.
That's slightly less than the 5.5% expected fourth-quarter sales gain at supermarket chain Kroger Co.
Target Corp's holiday-quarter sales, by contrast, are expected to fall nearly 1%, hurt by heavy discounts to clear inventory of discretionary items such as clothing, home furnishings and electronics.
Fighting Back
Wall Street is now more focused on how Walmart, which operates more than 5,000 U.S. stores, plans to fight back against supplier price hikes to maintain its dominant position as America's largest grocery retailer.
The chain accounted for 15.72% of all food and grocery spending in the United States in 2022, according to GlobalData.
"The key will be anything the retailer says about price investments," UBS analysts wrote in a pre-earnings note.
"There's a good chance that the company will say that it is bringing down some prices on general merchandise given the state of the consumer and the decline in certain costs like shipping."
Read More: Walmart To Close Three US Tech Hubs, Relocate Staff
Private-Label Power
Aside from price-cuts and discounts, Walmart is also expected to use its private-label offerings to negotiate pricing with more expensive national brands. Grocery accounts for more than half of U.S. sales at Walmart as of 2021.
In December, Walmart CEO Doug McMillon said "we do not like" that some suppliers were hinting at raising prices further in 2023.
He warned that Walmart would allocate space to private and tertiary brands if prices got too high.
Price Negotiations
Negotiations will likely be difficult as a number of Walmart's biggest suppliers, including Nestlé, Coca-Cola, Procter & Gamble and Unilever, which disclosed in recent weeks that they plan to embed more price hikes this year.
KitKat maker Nestlé on Thursday said further price hikes were necessary to offset commodity cost inflation.
Kraft Heinz and PepsiCo, in contrast, plan to pause further price hikes to counteract declining volumes, but their prices are still substantially elevated compared to a year earlier.
Still, Wall Street expects Walmart sales and revenue to rise in 2023 as its shipping and logistics costs moderate, even as labor expenses go up.
News by Reuters, edited by by ESM – your source for the latest retail news. Click subscribe to sign up to ESM: European Supermarket Magazine.
