A warning from Walmart about the health of the American consumer

“Choiceful, discerning, thoughtful” is how boss, Doug McMillon, described American consumers on February 21st, as he presented the retail behemoth’s quarterly results. That may be so. What they aren’t, at least in aggregate, is frugal. Last year consumer spending shot up even as real disposable incomes declined by more than 6%. America splurged on in January, shopping its way through a warm winter buoyed by 517,000 new jobs and a chunky inflation-linked bump in social-security cheques. Retail sales rose by 3% month on month, and consumer sentiment reached its highest level in more than a year. Those looking for evidence of a “soft landing”, where the economy avoids a recession despite tighter monetary policy, in the American consumer.On the surface, Walmart looks like exhibit A for the optimists. Its comparable sales in America grew by a brisk 8.3%, year on year. Look closer, though, and its results are full of warning signs. A big reason for its market-share gains in groceries was cash-strapped consumers, including high-income ones, trading down from fancier supermarkets. Its higher-margin discretionary range—toys, clothes, homeware and the like—did less well, despite heavy discounting to clear inventories overstocked as a result of a post-pandemic miscalculation about demand for certain goods. Worst of all, Walmart forecast sales growth of 2.5-3% for the current fiscal year, below analysts’ expectations.