AddThis

Americans buying cars, but not consumables

When Walmart lowered its full year sales forecast last month the company said customer were being cautious with their spending. Maybe so, but that wasn’t the case in new car showrooms were automakers reported record sales and in the process created new holiday headwind for Walmart and other retailers.

On August 15, Walmart reported disappointing second quarter financial results and same store sales decline of 0.3% at U.S. stores. At the time, CFO Charles Holley noted, “The retail environment remains challenging in the U.S. and our international markets, as customers are cautious in their spending. Net sales in the first six months were below our expectations, so we are updating our forecast for net sales to grow between 2% and 3% for the full year versus our previous range of 5% to 6%.”

Conversely, virtually every major automaker reported strong, if not record, sales growth during August and offered evidence of consumers’ willingness to spend freely. For example, sales at Ford increased 12.2% to 221,270 vehicles. Sales at Toyota increased 18.4% to 231,537 units. Honda set a new record with sales up 26.7% to 166,432 units. Hyundai too set an all-time sale record with 66,101 units leaving showrooms for an 8% increase. Mazda sold 28,106 vehicles, a 26.4% increase from last year and the most vehicles in 10 years.

The strength wasn’t limited to mass market brands either, as luxury makes set new records too. BMW sales in August increased a stunning 45.7% to 24,523 vehicles. Mercedes-Benz USA increased sales by 15.8% to 27,144 units and Porsche Cars North America increased sales 10% to 3,327 vehicles. For the year, Porsche sales are up 28% to 28,456 units.

Why this matters to Walmart and other retailers is because in another month or two, about the time when they are looking to pry as much money as possible from shoppers, is when all those folks who bought new vehicles in August will be making their first or second payment. It is also worth noting that auto sales were strong all summer so many car buyers are adjusting to the new reality of having a big bite taken out of their household budget each month.
Obviously, that leaves less money to spend during the holidays and further pressures retailers who have warned of second half sales challenges. Aside from losing a job, nothing alters shopper behavior as much as having to make new car payment each month, something a surprisingly large number of people will be doing later this year.