Back to School Shopping Season: Why Walmart, Target, Best Buy and Gap Plan to Slash Prices
As inflation continues to squeeze family finances in all areas, many Americans have switched their spending habits to include cheaper options and to cut discretionary purchases.
While your best bet for deals is still likely to be found at discount stores — especially retailers that specialize in selling off high-end products at closeout prices — summer shopping (and the annual back-to-school spending spree) may be easier on the wallet this year, even at the most well-known chains.
As CNN Business reports, companies like Best Buy, Walmart, Gap and Target are lowering prices and promoting discounts in a frantic effort to get consumers to buy surplus inventory sitting on their shelves.
Excess Inventory Causing Markdowns
Excess inventory is a major problem right now as consumers are curtailing their spending with inflation staying so high. Retailers “badly overestimate[d] consumer demand,” according to Yahoo Finance, forcing them to take drastic actions just to get some movement on existing inventory.
Speaking to Reuters, Jason Benowitz — senior portfolio manager at Roosevelt Investment group — said that essentials like gas and food are the “fiercest competition” to retailers like Walmart, Target and Best Buy. These stores slashing prices aren’t just trying to outdo each other, but struggling against an increase in non-discretionary spending across a broad consumer base.
Luckily, customers are the beneficiaries of said price wars and markdowns, and may be able to snap up big deals. Here’s how the four chain stores listed above are dealing with the current inventory impasse amid this lingering bout of high inflation.
Last week, Best Buy forecast a larger decrease in annual sales than estimated.
“As high inflation has continued and consumer sentiment has deteriorated, customer demand within the consumer electronics industry has softened even further,” Best Buy CEO Corie Barry said, per Reuters.
Expect big sales from Best Buy. Already, there are reports of lowest-ever prices on the M1MacBook Air and big discounts on popular products like Apple AirPods Pro and the OnePlus 10 Pro phone.
At the beginning of June, Target CFO Michael Fiddelke told Yahoo Finance that the company would be making immediate changes to reflect the “new consumer reality.” To prepare for this, Target plans on cancelling orders, marking down inventory and taking a closer look at expenses as it moves forward.
“We didn’t anticipate the magnitude of that shift,” Target CEO Brian Cornell said, per CNN.
This commitment to re-evaluate market trends by Target means deep discounting for customers, especially on clothing and electronics. But as anchor Brian Sozzi mentioned on Yahoo Finance Live, “In their inventory, they mentioned kitchen appliances, TVs, outdoor furniture. Look for discounts, deals in those particular departments.”
Things aren’t looking rosy at industry leader Walmart either. The world’s largest retailer has slashed its second-quarter and full-year profit outlooks, blaming inflation and consumer thriftiness concerning non-essential items such as apparel. Walmart now sees full-year earnings tanking 11% to 13% compared to a prior estimate for a 1% drop, per Yahoo Finance.
“The increasing levels of food and fuel inflation are affecting how customers spend,” impacting their ability to buy general merchandise, Walmart CEO Doug McMillon said last week, according to CNN.
Walmart is looking to unload its inventory by offering more markdowns, particularly on clothing. As CNN detailed, Walmart recently launched Walmart Restored, a new program created to help customers discover refurbished products at low prices.
Gap has been working on addressing inventory issues by increasing promotions to move out overstock during its second quarter, per CNN.
“Customers, particularly lower-income customers, have become more cost conscious and are limiting purchases and/or seeking out lower-priced sale merchandise,” a company statement read. “They are being impacted by the overall inflationary environment.”
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