The past few days have seen two of America’s biggest retailers announce major price cuts.
When Target this week said it was cutting prices on thousands of products, it was probably doing so to keep up with rival Walmart, Joe Feldman, an analyst at Telsey Advisory Group, told the Financial Times (FT) Wednesday (May 22).
“What’s interesting is it’s likely to expand to the rest of retail, given Walmart and Target set the tone on pricing,” he added.
Target said Monday (May 20) it was reducing prices on around 5,000 “frequently shopped items,” such as milk, meat, bread, produce, coffee, paper towels and pet food.
Walmart is also promoting lower prices, as the retail giant’s CEO Doug McMillon told analysts last week on a call discussing the company’s better-than-expected first quarter earnings.
As the FT report noted, these cuts came amid “signs of weakness” among other retailers. For example, Lowe’s this week reported a 4.1% drop in first quarter same-store sales customers scaled back on major renovation projects.
(This decline was offset somewhat by positive sales trends among the company’s professional customer base, PYMNTS wrote.)
The FT report pointed to data from research company NIQ showing consumers spending more on consumer packaged goods in 2024 than they were five years ago.
“I don’t think we’re going to see much in the way of wholesale declines in prices,” Steve Zurek, vice-president of pricing and promotion thought leadership at NIQ, told the FT.
However, he said the outlook for prices has changed dramatically in the last year: “It’s not going to be everything going up.”
The price reductions are happening as consumers are cutting back at the grocery store, a trend led by members of Generation X.
Research by PYMNTS intelligence shows that millennials were the most likely to have made at least one change to their grocery buying behavior in the face of higher prices: to cut back on the quality of products they had purchased, to make fewer nonessential purchases or to shop at less expensive merchants. It is Gen Xers, however, who were the most likely to have made all three of those changes.
“Having experienced more economic cycles, including the 2008 financial crisis, Gen Xers might be more cautious and proactive in managing their finances during periods of economic uncertainty than their younger counterparts,” PYMNTS wrote. “This could lead them to adopt a combination of strategies to mitigate the impact of inflation.”
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