Walmart’s core customer group is too poor to shop

Walmart core shoppers have no money to shop

Walmart is in trouble and a big chunk of its trouble comes down to the flat income levels of its core customer base.

According to Moody’s, the company’s core customers are struggling with flat income levels, and savings from lower fuel prices aren’t translating into more retail spending.

In a note to client’s on Wednesday Moody’s Vice President Charles O’Shea said the business is also under pressure from deflation in key product categories, such as food, and the impact of the strong dollar abroad.

“Walmart is facing an almost perfect storm when it comes to top-line growth,” O’Shea wrote. “Until the health of the lower-to-middle-income consumer improves, Walmart will continue to face macroeconomic headwinds in the US.”

That note is on top of Walmart’s own warning last month that it expects almost no sales growth in 2016.

While revenue growth has become stagnant, the company is spending more than ever on employee wages and its e-commerce platforms in order to compete against Amazon.

As Business Pundit reported on Tuesday, sales growth for Walmart’s online portal has dropped steadily for the last two years. 

O’Shea believes Walmart’s online portal is still impressive: “All-in-all, a $14-15 billion global online business is more than respectable, especially when it augments a brick-and-mortar business that generates around $470 billion in annual sales.”

He said that the stock market “can be unfriendly,” and investors are ignoring the long-term benefits of Walmart’s e-commerce investments.

“We continue with our thesis that brick-and-mortar retailers that resist the move to at least have representative online businesses will find themselves in a precarious competitive position over the longer term,” O’Shea wrote.

Walmart has a long way to go in catching up to Amazon on the e-commerce front, and with stagnant wage increases it could get worse for the company before it gets better.

Written by Tammy Johnson

Tammy Johnson

Tammy Johnson is the Retail Editor at BusinessPundit. She focuses on Fortune 500 retail company's and disruptive brick-and-mortar and e-commerce companies that are changing the retail landscape.