Walmart's earnings report shows an upbeat consumer
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Shoppers at a Walmart store earlier this year. Photo: Gabby Jones/Bloomberg via Getty Images
Official economic data shows the bedrock of the economy — the American consumer — is strong. Anecdotes from the nation's largest retailer back that up and suggest the good times will continue into the holiday season.
Why it matters: Fears of a potential recession sparked by sluggish consumer spending looked like a head fake. Robust shopping continues to underpin robust growth.
Driving the news: Few companies have their fingers on the pulse of the economy as completely as Walmart. The company says consumers are splurging more on non-essentials like toys and televisions, a trend they anticipate will continue through the end of the year.
- "We had good back-to-school, we had a good Halloween — and it's important to string these holidays together," John Furner, CEO of Walmart's U.S. division, said on the company's earnings call Tuesday morning.
- "We go into the [holiday] season with momentum," he added.
The big picture: A real-time indicator of consumer confidence showed a rebound in sentiment after the election, fueled by more economic optimism among Republicans.
- While inflation and other economic concerns might have affected how Americans voted (or made them double down), it has not knocked consumer spending off its steady trend.
- Walmart says prices are down for some grocery items and general merchandise — a relief to consumers.
- But the company also confirmed that it had fewer markdowns across its business than in previous quarters, a sign consumers are still somewhat willing to stomach higher costs.
- Walmart, which continues to attract higher-income customers, also cited a greater willingness among shoppers to pay the premium for faster delivery.
By the numbers: The data so far, however, suggests consumer spending kicked off the final three months of the year on solid footing.
- Retail sales in October rose 0.4%, while updated data for the previous month showed spending jumped by 0.8%.
- That report primarily examines spending on goods. A more complete snapshot of consumer spending on services — hotels, restaurants, etc. — will be released next week.
What to watch: High delinquency rates are one indicator flashing yellow. The New York Fed said last week that credit card delinquency rates fell slightly in the third quarter, though a larger share of Americans transitioned into delinquency for auto and mortgage loans.
- Another risk: potential trade wars, if President-elect Trump follows through on his campaign promise to aggressively hike tariffs.
- Walmart's CFO told CNBC that tariffs might fuel inflation and the retailer might have to hike costs if that promise becomes a reality.
