Walmart is warning American consumers that hard times are ahead. This week, the company confirmed more price hikes, store closings, and layoffs in 2023. Executives, including CEO Doug McMillion, expect increased turbulence in the retail sector this year. Analysts at UBS believe almost 100,000 stores could shut down. They say a flood of bankruptcies is about to hit major US retailers, starting this summer. That comes as consumer spending drastically slows down, retail sales drop, and companies report pressure on profit margins. Walmart’s cautious note is putting other big brands on high alert given that economic conditions continue to deteriorate all over the country.
Walmart sounded alarms this week when it slashed its quarterly and full-year profit estimates. America’s largest retailer is warning that conditions in 2023 will be abnormally hard as it forecasts slower sales and profit growth, disappointing investors, and leaving other major US companies on edge.
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On top of the problems happening in its brick-and-mortar operations, Walmart reported an 8% decline in average daily visits to its website over the past 12 months. So far this year, the company already announced a large number of layoffs at its fulfillment centers and multiple store closings. Now it is saying that consumers should brace for more price hikes due to “stubborn inflation”.
In fact, a new survey conducted by Digital.com, which asked over 1,000 retail owners and executives how inflation is impacting profitability, pricing, and discount offers found that 55% of retailers have increased prices by 20% or more on average. Of those who have increased prices, 28% of major retailers raised prices by 50% or more. When asked why they have increased prices, 66% of businesses cited rising inflation, 69% supply chain issues, and 57% increased demand. Furthermore, 55% shrank discounts, and 48% increased the price of complementary products.
Adding to consumers’ woes, about 38% of businesses said they will offer fewer discounts than last year, and 14% will not offer any at all. Walmart is certainly one of the best-positioned companies in the industry, and its large-scale operations definitely give the company leverage to stay afloat during turbulent times like these. But that doesn’t mean that the retailer isn’t struggling, and the message it is sharing with the public and other businesses is a sign that economic conditions are going to get even tougher from this point on.
Since the start of the year, retail bankruptcies are piling up. Party City, Tuesday Morning, Bed Bath & Beyond, Joann Fabric, David’s Bridal, mattress manufacturer Serta Simmons and Independent Pet Partners, a pet store retailer, have filed all for bankruptcy in 2023. UBS analysts updated their store closings prediction in April, saying that if the economy continues heading towards a prolonged recession, the number could reach upwards of 94,000 store shutdowns. Ongoing economic headwinds may eviscerate financially struggling brands that have barely survived the pandemic-induced recession of 2020 and 2021. This time around, only the strongest will remain standing, and we’re about to find out who is who.
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