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

Walmart tabletop shelf display

Walmart’s sales in the third quarter were weak in the home department.

Bentonville, Ark. – Walmart US is sucking up more customers, but still operating due to oversupply of general merchandise.

At the end of the third quarter, excess inventory was just under $1 billion, about a third of what it had been at the end of the second quarter. According to John Furner, president and CEO of Walmart in the US, clothing and certain categories of general merchandise are still among the largest overstocks.

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

During the third quarter, overall merchandise comp at Walmart US fell by low single digit sales. Sales in household goods, electronics and clothing were weak. Sales were strongest in lawn and garden, automobiles and basic supplies for school classes.

At Sam’s Club, the Home & Apparel segment grew market share by high single digits, with strengths in housewares, apparel, sporting goods and seasonal goods.

Other takeaways from the call:

Inflation distorts the mix. While the fourth quarter is off to a good start, Walmart believes consumer spending could slow down, especially in general commodity categories, due to continued inflationary pressures in daily staples.

When does general merchandise bounce back? One of the biggest changes this year is the skewed portion of sales driven by food and consumables. That imbalance is expected to persist into 2023, said John David Rainey, EVP/CFO. “We have no expectation of that bouncing back next year,” he added.

Market share growth: Trade-down customers are now more likely to shop at Walmart and buy from a wider range of categories than they did in the summer. The retailer tries to retain them with its loyalty program and extensive online marketplace.

Prices: Because Walmart is Walmart, it hopes to lower prices next year as supply chain costs come down. For the fourth quarter, it offers competitive prices in specific areas, especially in food. But it is also prepared to lower prices later in the season if consumers start to spend less.

“The quarter has just started. We’re trying to build in 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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