Walmart and Target are cutting prices to entice customers
FILE - Customers shop at a Target store on August 16, 2023, in Chicago, Illinois. (Photo by Scott Olson/Getty Images)
The retail industry has issued plenty of deals in recent months to pull in consumers and stimulate sales. It's working.
Two of the biggest retailers, Target and Walmart, have recently reported a jump in traffic due to the reduction in prices in recent months.
On Wednesday, Target CEO Brian Cornell told analysts during an earnings call that the company reduced prices on about 5,000 frequently purchased items in many markets during the summer. In turn, it "saw an acceleration" in unit and dollar sales trends in these businesses in the second quarter, or the three-month period ending June 30, according to Cornell.
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"We feel really good about the way the consumers reacted to the price investments we've made on those 5000 frequently purchased items," he said.
The company's food and beverage as well as its essential categories saw growth in traffic in the quarter, reflecting how "consumers are responding to our offerings in an environment where they are focused on value," Cornell said.
He didn't comment on whether additional price cuts would occur during the third quarter.
During the last quarter, Walmart U.S. also rolled out more than 7,200 rollbacks across categories. This includes a 35% increase in the number of rollbacks in food, which has particularly been a pain point for households.
Rollbacks refer to a temporary price cut on goods.
For its U.S. segment, the company generated $115.3 billion in net sales during the quarter. Sales at stores open for at least a year grew 4.2%, driven largely by strong traffic. It also reported increased transactions, units and share gains in grocery.
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CEO Doug McMillon hinted the company will keep reducing prices on certain goods, saying it will "continue working to get more rollbacks to help customers and help members save money."
Economists say the midsummer boost in retail sales figures was helped in part by the deals offered by retailers.
"July’s retail sales figures mirror the strength in the economy, which continues to expand even though there are pressures on growth," National Retail Federation (NRF) Chief Economist Jack Kleinhenz said. "Households are proceeding with measured spending and getting the benefit of falling retail prices despite still-elevated prices for services."
Last month, core retail sales as defined by NRF — which are based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.4% on a seasonally adjusted basis month over month.
For the first seven months of the year, core retail sales were up 3.4% annually, which is in line with the NRF's forecast for 2024 retail sales to grow between 2.5% and 3.5% over 2023.
"Even with growth of the labor force cooling, consumer spending remains the backbone of the economy and is keeping the expansion on a positive path. We are all waiting to see what direction the Fed will take with interest rates," Kleinhenz said.