NEWSLETTER
Inflation has renewed household budgets in recent years, which makes buyers more sensitive to the price.
Until now, that has been a tail wind for Big-Box retailers like Walmart, who have been able to obtain a market share because their mass purchase power helps them to keep the prices low.
Do not miss the move: Subscribe to the free newspaper of Thestreet
The company has also benefited from relatively low unemployment and salaries that grow faster than inflation during the past year, which has helped keep customers.
Unfortunately, some discouraging warning signs are flashing that could make retailers like Walmart this year.
Walmart has captured a growing part of the retail market
There is a good possibility that there is a Walmart near you. The company operates more than 5,200 Stores throughout the country, including Sam's Club, and 44% of Americans buy in one of their stores every year.
Approximately 255 million people buy in a walmart (WMT) worldwide in a certain week, according to capital One. That, as expected, makes Walmart the largest retailer on the planet. It generated $ 648 billion in sales during fiscal year 2024 and $ 681 billion in fiscal year 2025, 5.1% more year after year.
Related: Analyst warns about the surprising value market risk
In summary, Walmart is a Goliath, which demands about 8.6% of the total retail market participation, based on One Capital data.
The company's sales growth has arrived in part of the expansion to electronic commerce to challenge amazon. It is forecast that the Walmart Electronic Market Fee will eclipss 10% this year, compared to 4.4% in 2017, according to <a target="_blank" href="https://www.digitalcommerce360.com/article/can-walmart-catch-amazon-in-ecommerce/#:%7e:text=While%20Walmart’s%20market%20share%20has,largest%20North%20American%20online%20retailers.”>360 digital trade.
It has also benefited from continuous domain in the groceries, where it has a market share of almost 37%, and an increase in household visits that earn more than $ 100,000 annually, since they have become more aware of costs.
Economic data increase the risk of recession
Walmart's ability to maintain lower prices thanks to his purchasing power will probably give him an advantage against smaller rivals. Even so, there are signs that the economy could be decreasing, which makes it difficult for all retailers to grow their businesses this year.
Related: the US economy faces uncertainty markets
A warning signal is consumer confidence, which has recently fallen.
The Conference Board recently published its February consumer confidence survey, and the results were not excellent.
“At the main level, the reading for consumer confidence fell to 98.3 in February from 104.1 for January and well below the more than 102 that economists were looking for,” Guilfoyle said in a Publish in Thestreet Pro.
The conference board data “were the most steep one month for this series since August 2021,” Guilfoyle said.
The results of the consumer's feelings survey at Michigan's University were not better. In fact, Guilfoyle described them as “horrible.”
“There is no way to conduct the consumer feelings of last week and the consumer confidence survey this week smells sweet,” Guilfoyle said. “If these results are precise, and they can be how they agree with each other (often these two surveys do not agree), the consumer of the United States is preparing for a direct economic recession.”
Another is the recent increase in some inflation measures, which has led to the Federal Reserve to stop the interest rate reduction plans.
The consumer price index showed inflation of 3% in January, compared to 2.9% in December and solidly above 2.4% registered in September.
The economic data informed so far have led the GDP monitoring tool of the Atlanta Fed, Chorleawhich measures total economic activity, to be negative for the first quarter. It is currently in negative 1.5%, a marked contrast with the fourth quarter 2.3% GDP growth.
Estimation of the forecast tool will change as more data is informed. Even so, the GDP of weakening compared to recent rooms is worrying. If GDP tends the lowest trends, we could experience more job losses and smaller salary increases, none of which is great news for retailers, including Walmart.
We are already seeing an increase in layoffs, particularly in Silicon Valley, where large technology companies that historically pay well reducing the workforce.
Last week, the Labor Department reported that 242,000 Americans requested unemployment Benefits, compared to 220,000 the previous week and higher than the average claims of four weeks of four weeks.
Macroeconomic uncertainty is not new and is not lost in the senior direction of Walmart.
The company is guiding the growth of net sales of approximately 3% to 4% in fiscal year 2026.
“Our perspective is a relatively stable macroeconomic environment, but acknowledges that there are still uncertainties related to consumer behavior and global economic and geopolitical conditions,” said financial director John David Rainey at the Fiscal Telephone Conference of the Fourth Quarter of the Company. “As a result, we have adopted a similar approach to our initial orientation vision for the year as we have done in recent years, balancing the risk known with what we can control.”
“I think last year, the last years very consistently, we have to recognize that we are in an uncertain moment. And we do not want to get out of our skis here. There is a lot of year to play,” Rainey added.
Related: The veteran fund manager presents a striking prognosis S&P 500
