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Grocery shoppers aren't feeling so great
Aisle 1: With both Walmart and Target reporting earnings this week, we’ll soon get a good picture of current shopper sentiment. But all signs point to struggles for any food retailer not squarely focused on value.
![Grocery shopper Grocery shopper](https://eu-images.contentstack.com/v3/assets/blt58a1f8f560a1ab0e/blt264f6254c0720b01/669f187673512f1901b058c9/grocery_20shopper-shutterstock.jpg?width=1280&auto=webp&quality=95&format=jpg&disable=upscale)
Fair warning: I’m not an economist. In college, I took the required numbers course for journalists, affectionately dubbed “math for trees.”
But, even from my non-rarified perch, it’s pretty clear shoppers aren’t feeling too hot right now.
And we’ll all get some tangible evidence of that this week, when both Target and Walmart report their earnings. (Target on Wednesday, Walmart on Thursday).
Target, where everybody knows how easy it is to stop in for toilet paper and toothpaste and wind up spending $100 on Tabitha Brown snacks, rose-gold throw pillows, giant candles and a “Plant Lady” coffee mug, is likely to feel the most damage as shoppers continue to focus on must-have items (like food) rather than fun-to-have items (everything listed above).
In fact, analysts are saying Target will likely post its first drop in quarterly earnings in more than six years this week. More than a dozen stock market experts have cut their forecasts on the Minneapolis-based retailer since June, according to a Reuters report Monday.
“Target is going to suffer more versus the others because they have a much larger consumer discretionary element to their business,” Edward Jones Analyst Brian Yarbrough said in the piece.
Target already warned of this trend during the first quarter, when its same-store sales grew a measly 0.7%.
Value-focused Walmart, meanwhile, continues to grow its grocery market share, now raking in more a quarter of all grocery dollars, according to a Numerator report released last week.
By a lot of markers, things are getting better for consumers. But actual numbers are one thing, human perception is another.
Food-at-home inflation is slowing and is nowhere near the double-digit highs of last year. But grocery prices were still up 3.6% in July. And a year of significant consumer price index jumps has taught shoppers that it’s smart to prioritize value over just about everything else.
That’s why Grocery Outlet continues to do so well, hitting a record $1 billion in net sales last quarter.
In April, consumers thought grocery inflation was 22.6%, more than 15 percentage points higher than it actually was, according to the latest Consumer Trends Tracker from research firm Dunnhumby. What’s more, more than 60% of households said they’d have trouble covering an unexpected expense of $400, up 1.3% from November 2022.
The ending of SNAP Emergency Allotment benefits in March cut nearly $100 a month from the average household’s grocery budget. And 36% of families surveyed by Dunnhumby reported skipping meals or cutting serving sizes to save money.
Forget the sequined throw pillows. The winners this quarter, and for the foreseeable future, will likely be the ones who make a value proposition shoppers can’t resist.
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