Walmart is losing lower-income shoppers as extra unemployment benefits end and stimulus dries up

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Walmart’s earnings beat expectations amid the pandemic. But, in the US, same-store sales growth is softening — and the lack of a second stimulus package is part of the problem. 

On Tuesday, Walmart reported total revenue of $134.7 billion in the most recent quarter, up 5.2% from the same period in 2019 and above analysts’ expectations of $132.2 billion. In the US, same-store sales increased 6.4%. 

CEO Doug McMillon said on a call with investors that the company saw less of a boost from government stimulus than it did earlier this year, when US same-store sales grew 9.5% in the second quarter. Managing director of GlobalData, Neil Saunders, zeroed in on this downtick as evidence that Walmart is losing lower-income and unemployed shoppers in a note on Tuesday. 

“The ending of enhanced benefits which had a very negative impact on the 12.6 million Americans who are unemployed, particularly those on lower incomes who lack a buffer of savings,” Saunders wrote. “Walmart is more exposed to this group than many other retailers and, as a result saw some deterioration in spending levels.” 

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Saunders said same-store sales growth also slowed due to more stores reopening and people making fewer trips to Walmart, due to health concerns and disruptions to pre-pandemic routines. 

“The signs that retail is becoming tighter and that the boom is ending are there,” Saunders wrote. “Unless a new round of stimulus is agreed, retailers will need to navigate this new landscape into the fourth quarter and beyond.”

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Walmart CEO urges Congress to pass stimulus package as experts worry about permanent economic damage

McMillon urged Congress to pass another stimulus package on Tuesday’s call with investors, saying it was “imperative” that elected officials work together to provide aid for small businesses. Negotiations over the stimulus package have stalled in recent months. 

“Democrats are assailing Republicans for insisting on a slimmer $500 billion relief plan,” reports Business Insider’s Joseph Zeballos-Roig. “Instead, they are pressing for at least $2 trillion in additional spending. President Donald Trump has tuned out of the negotiations so far while he attempts to fight the election results.”

Experts have said that Congress’s failure to pass a new stimulus package will likely cut into holiday shopping. On Tuesday, real estate firm JLL’s chief economist, Ryan Severino, said in a report that the lack of stimulus is putting a damper on spending as coronavirus cases surge in the US. 

“Although on a recovery track, the economy could falter between now and when widespread vaccination occurs if the impediments to growth become severe enough,” Severino wrote. “Meanwhile, this is occurring against a backdrop of slowing economic growth and increasing concern that damage to the economy could become permanent.” 

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Source:: Businessinsider – Politics

      

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