Walmart looking for general merchandise sales to rebalance as food and consumables rise

Bentonville, Ark. – Walmart US is attracting more customers, but is still working on a general merchandise surplus.

At the end of the third quarter, excess inventory stood at just under $1 billion, about a third of what it was at the end of the second quarter. According to John Furner, president and CEO of Walmart in the United States, apparel and some general merchandise categories remain among the most heavily overstocked.

“We will continue to work through these. We said at the end of the first quarter that we needed a few quarters to go through the inventory and we continue to do so,” he told investors on the company’s quarterly call this morning.

During the third quarter, the general merchandise mix declined into the low single digits at Walmart in the United States. Sales were weak in home, electronics and apparel. Sales were strongest in lawn and garden, automotive and back-to-school essentials.

At Sam’s Club, Home & Apparel segment composition grew in the high single digits, with strength in homewares, apparel, sporting goods and seasonal products.

Other takeaways from the call:

Inflation distorts the situation. Although the fourth quarter got off to a good start, Walmart expects the consumer to slow down in spending – especially in general merchandise categories – due to continued inflationary pressures in everyday staples.

When will general merchandise rebound? One of the biggest changes this year has been the lopsided share of sales driven by food and consumables. This imbalance is expected to continue into 2023, said John David Rainey, EVP/CFO. “We have no anticipation of it bouncing back next year,” he added.

Market share growth: Declining customers are now shopping at Walmart more frequently and shopping in a wider range of categories than during the summer. The retailer is trying to retain them with its loyalty program and expanded online marketplace.

Pricing: Walmart being Walmart hopes to lower prices next year as supply chain costs come down. For the fourth quarter, it offers tight prices in targeted areas, particularly in food. But he’s also ready to cut prices later in the season if consumers start to cut spending.

“The shift has just started. We’re trying to incorporate some conservatism,” said Doug McMillon, president and CEO of Walmart Inc. “We’ll see what happens in the rest of the quarter.

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