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Retailers Unsure About Consumer Spending

Walmart and Dollar Tree indicated last week that consumer spending and demand after the holiday season are difficult to determine.

In an interview with CNBC, Walmart CEO Dough McMillon noted that sales after the current peak shopping season are up in the air. High credit card balances and low bank accounts create uncertainty even after a resilient shopping year.

“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,” McMillon said, adding “next year’s a different story.”

The CEO said deflation on some items is helping to create a new dynamic; however, this relief has yet to come to most food categories, which currently sit at roughly the same price as the previous year. In general, the trend of falling prices means Walmart and other retailers will have to work harder to sell more items.

On Thursday, Dollar General shared a more worrisome outlook, with constrained consumer spending expected in the new year, reports Reuters.

"Our customer continues to tell us they are feeling significant pressure on their spending which is supported by what we see in their behavior," said Dollar General CEO Todd Vasos.

Dollar stores have struggled with a shift in shopping preferences in the face of competition with retailers such as Walmart, noted Reuters. As such, they have had to mark down everyday staples and offer promotions to manage excess stock.

In total, merchandise inventories were down 1.8 percent on a per-store basis; however gross margin fell 1.47 percentage points to 29 percent, partially due to a rise in retail shrink, inventory that is lost, damaged, or stolen. The discount retailer also said that it expects the shrink to persist into 2024.

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