Consumer spending is on the decline for the first time in a decade as inflation pushes prices higher and retailers struggle to continue offering bargains, Walmart’s former US CEO told CNBC.
Bill Simon, who headed up the discount retailer’s US operations from 2010 to 2014, said that “for the first time in a long time, there’s a reason for the consumer to pause.”
The culprit spans beyond inflation, which has continued to run rampant despite the Federal Reserve’s aggressive tightening campaign to bring it back down to 2%, according to Simon.
“We’re starting to see this accumulation of global macroeconomic issues, geopolitical issues, inflation, interest rates, loan repayments,” he told CNBC.
Aside from President Joe Biden forgiving $9 billion in student loan debt for 125,000 borrowers last week, Simon was likely also referring to Congress’ row over the federal budget that nearly saw the government shutting down as well as new global tensions triggered by the Israel-Hamas war.
“That sort of pileup wears on the consumer and makes them wary,” Simon told CNBC.
But the pressures aren’t only on the consumer. Retailers are facing the same headwinds, Simon said, and it’s making it increasingly difficult to offer steep bargains.
“They usually say 50-inch TV [is] $199 or something like that. And now, they say 50-inch TV [is] 40% off,” Simon told the news outlet. “You use percentages when you’re not real proud of your price point. I think you’ve got inflation pushing the relative price points up.”
Simon — who now works for investment firm KKR and sits on the board of Darden Restaurants and HanesBrands — said Walmart has an advantage over rivals Amazon and Target, though they’re all underperforming in this economy.
“It’s solely because of the [Walmart’s] food business,” Simon told CNBC. “They’re going to have both the eyeballs and the foot traffic to probably have a better Christmas than maybe their competitors.”
Amazon has seen its stock tumble more than 10% over the past month, which could be attributed to a slowdown in sales at Amazon Web Services (AWS) as businesses scrutinized their cloud bills, as well as softer e-commerce sales as consumers put off discretionary purchases.
Target also saw earnings suffer for the first time in six years, which was blamed, in part, on the negative response to its “Pride” clothing collection that featured “tuck-friendly” swimwear and LGBTQ-friendly gear for infants and children.
Rampant theft has also pushed the Minneapolis-based discount chain to shutter nine locations across Seattle, Portland, Ore., San Francisco, and New York City.
Walmart, meanwhile, reported in the latest quarter that e-commerce increased a whopping 24% in the 13-week period ended July 28, buoyed mostly by pickup and delivery orders placed online.
Sales at stores and digital channels open for at least a year were up 6.4%, and international net sales increased 11%, to $27 billion as foot traffic increased 2.8% at the Arkansas-based retail behemoth’s 10,500-plus locations.
The Post has sought comment from Walmart and Simon at KKR.
This story originally appeared on NYPost
