High-income consumers may be creating a frothy situation. walmart.
Even though wealthy shoppers have driven the retailer’s recent strong quarterly results, former Walmart U.S. CEO Bill Simon believes it’s important to retain wealthy shoppers. I warn you that it will be difficult.
“The Walmart experience is better than it used to be, but it’s still not a premium experience,” he said on CNBC’s “Fast Money” Thursday. “Walmart is about convenience, cost and selection. It’s not about service.” Told. “As economic hardship eases, service will become more important than convenience or price. And some consumers will leave. That’s a bubble.”
His warning came after Walmart’s stock hit an all-time high, dating back to August 1972, when it began trading on the New York Stock Exchange. Shares rose about 7% on Thursday after the discount retailer reported better-than-expected first-quarter fiscal year adjusted earnings and sales. Walmart reported that higher-income consumers boosted profits, especially in its grocery business.
“The challenge is that the tailwinds from food inflation that have been pushing Walmart up will eventually reverse,” said Simon, a board member. Darden Restaurants and hanes brands.
Last October, Mr Simon warned on ‘Fast Money’ that the magic of bargain sales was disappearing as consumer spending began to decline for the first time in a decade. His call at the time applied to low-income consumers.
Now, Simon argues, high-income consumers going to Walmart isn’t good news for the economy as a whole.
“When money is tight, people react. Even high-end consumers react,” he says.
Despite warnings of a bubble, Simon thinks Walmart will be a “great investment” over the next 12 months.
“As long as we have tailwinds from inflation and especially food inflation, we’re going to see more foot traffic in Walmart stores,” Simon said.
But he thinks stocks could hit a tough patch in the next 24 months as inflation declines and luxury consumers move away from shopping at discount retailers.
“Some of the tailwinds will turn into headwinds as inflation eases and service becomes more important than price,” Simon said.
