Walmart takes advantage of inflation to grab land

Tienda de Walmart en North Brunswick (Nueva Jersey, EE UU), en julio de 2020.

Consumers are increasingly turning to big box retailers, which can hoard products and sell them cheap.

Inflation is the enemy of the consumer, but it is proving to be a friend of Walmart. The retailer reported $153 billion in revenue for the three months ending Oct. 31 on Tuesday, beating analyst estimates but also boasting of gaining market share. Through a combination of ubiquity and weight, it is managing to turn a time of economic anxiety into a land grab.

The retailer said revenue grew nearly 9% year-on-year in its third quarter, when analysts had expected 5%. As inflation, which stood at an annual rate of 7.7% in October, pressures shoppers, more of them are turning to big box retailers, which can hoard products and sell them cheap. Walmart said he saw visits from households earning more than $100,000 grow.

It is true that costs rose faster than income. Gross profit margin, which measures what is left after paying for the products you sell, fell one point from a year ago to 24%. But providers are taking a proportionally larger share of the damage. The gross profit margin of a basket of 14 consumer goods companies we’ve analysed, including Clorox and PepsiCo, fell 2 points on average in the third quarter.

So Walmart’s sheer size is paying off. Consumer goods makers like P&G are raising prices to support costs, but often not enough. For example, Keurig Dr Pepper, for soft drinks and coffee: prices rose 12% in the quarter, but manufacturing cost grew 22%.

Walmart’s rise in the stock market on Tuesday is quite a twist. Just six months ago it went under because it had overestimated demand for products like outdoor furniture. Now he’s got it all back. Meanwhile, its rival Target has been down since May. Customer tastes may change, but in times of inflation, market weight is a commodity investors will gladly pay for.

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Brian Adam
Professional Blogger, V logger, traveler and explorer of new horizons.