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Prices are falling for thousands of items at Target and Walmart, with U.S. retailers’ results revealing weariness among some consumers after three years of high inflation.
Target announced this week that it will lower prices this summer on 5,000 items ranging from milk to paper towels, in an effort to remain competitive. Walmart told analysts last week that it had cut prices on a large number of grocery items.
The reductions by two of the largest general merchandise chains illustrate how retail prices are stabilizing, or even falling, after years of increases supported by pandemic-era supply chain disruptions and by a robust American labor market. Persistent inflation has soured Americans’ moods in this election year: 71 percent of respondents in the latest FT-Michigan Ross poll said they thought economic conditions were negative.
Target, which has nearly 2,000 stores in every U.S. state, reported a 3.7 percent decline in first-quarter same-store sales on Wednesday, reflecting a decline in the number and value of transactions. This follows an annualized decline of 4.4 percent in the fourth quarter.
The Minnesota-based company announced this week that its new round of price reductions would apply to a range of household essentials, ranging from a 5 percent reduction for a pound of butter to 14 percent off Clorox scented wipes. On Wednesday, it forecast that the decline in same-store sales will end in the current quarter.
“We know consumers feel compelled to get the most out of their budget,” Rick Gomez, Target’s head of food, essentials and beauty, said in the announcement. Target did not respond to requests for comment before releasing its results.
Target’s announcement came days after Walmart revealed an unusually large increase in its so-called rollbacks, which are discounts on the low prices the world’s largest retailer is known for, usually for about 90 days.
The number of grocery items receiving these price reductions increased 45 percent year-over-year in April. John Furner, chief executive of Walmart US, said stores had now seen nearly 7,000 withdrawals and he hoped that would help its grocery sales for the rest of the year at a time when the price difference between eating out and preparing meals at home had widened.
Customers were “responding to our price leadership,” Walmart CEO Doug McMillon told analysts.
Its U.S. operations, which include more than 5,200 stores, reported a 3.8 percent increase in comparable sales in the first quarter, which came entirely from higher transactions rather than prices. Households earning $100,000 or more have been the biggest drivers of demand, executives said.
Joe Feldman, an analyst at Telsey Advisory Group, said Target was likely motivated to keep pace with Walmart.
“What’s interesting is that this will likely spread to the rest of retail, given that Walmart and Target set the tone on pricing,” he added.
Signs of weakness emerged in other sectors of U.S. retail. Hardware retailer Lowe’s on Tuesday reported a 4.1 percent drop in same-store sales during the first quarter as customers scaled back major home improvement projects. Department store chain Macy’s announced that comparable sales were down 1.2 percent at the stores it owns.
While customers are enjoying strong wage and employment growth, “inflationary pressures persist and they’re feeling that pinch,” Macy’s Chief Executive Officer Tony Spring told analysts.
The effects of inflation have worsened, although the rate of change has slowed compared to two or three years ago, according to the NIQ. In 2024, Americans spent a third more on consumer packaged goods than in 2019, the research company noted.
Rising prices boosted the sector’s growth, but U.S. retail sales of $705 billion in April were essentially unchanged from March, while sales declined at general merchandise stores, the Bureau reported of the census.
“I don’t think we’re going to see a significant drop in wholesale prices,” said Steve Zurek, vice president of pricing and promotion thought leadership at NIQ. But he said the outlook for prices was very different from two years ago: “Not everything will go up.”
