Walmart chases new and younger customers as tariffs rattle shoppers

CNBC

a day ago

BENTONVILLE, ARK. — As tariffs drive prices higher, Walmart unveiled its latest efforts to woo new and younger shoppers — including a fresh advertising campaign, a clothing brand designed for tweens and drone deliveries in more cities.
The moves, which the retail giant's leaders announced this week, illustrate how the discounter sees opportunities to grow even while consumers tighten their wallets and the economic outlook appears murky.
Walmart, the largest private employer and retailer in the U.S., hosted thousands of hourly employees, store managers, investors and reporters this week at its Associates Week event in its hometown of Bentonville, Arkansas and nearby Fayetteville. The event, part-pep rally and employee recognition ceremony, coincides with its annual shareholders meeting and caps off with surprise celebrity and musical performances. This year, Jimmy Fallon emceed and Post Malone, Camila Cabello, Noah Kahan and The Killers performed.
Despite the festive atmosphere, it was hard to overshadow the events outside of Arkansas. The celebration came at a time when tariffs have roiled the retail industry, forced price increases across chains and raised questions about economic growth. Even so, Walmart has insisted it has an opportunity to keep gaining market from value-conscious shoppers across incomes, including wealthier households, by offering better items and more convenience — an effort it hopes its new plans will boost.
Walmart Chief Financial Officer John David Rainey told reporters on Friday that tariffs haven't changed consumer spending patterns — where shoppers are paying more for groceries and holding back on other items.
"It's been very consistent, and what we've seen over the last year, even two years, is that consumers are spending more on food, and that gives them less money to spend on general merchandise," Rainey said, referring to discretionary items like clothing and toys.
"You can still tell that wallets are stretched, that consumers are still faced with high prices, even though the year over year inflation numbers are not the headlines that they were 18 months ago," he said.
Rainey warned last month that Walmart would have to raise its prices because of tariffs, a remark that drew sharp criticism by President Donald Trump, who told the company to "EAT THE TARIFFS" in a social media post.
Walmart CEO Doug McMillon stood by the decision to announce the price increases.
"We're just trying to be good retailers," he said. "And so when we had the Q1 earnings release, we wanted to communicate what we're seeing. I think we have a responsibility to do that for shareholders, and I think we did it appropriately."
McMillon declined on Friday to specify categories or merchandise where Walmart has increased prices, saying that the company is "doing everything we can to offset" cost pressure on imported items. About two-thirds of what Walmart sells in the U.S. is made, grown or assembled in the country.
Groceries make up the majority of sales for Walmart in the U.S. and the category has thin profit margins. Yet selling more of higher-margin categories, such as apparel and home decor, can help Walmart offset cost pressures or price increases from tariffs, McMillon said.
As trade tensions dampen consumer sentiment, Walmart believes the new investments can help it win new consumers who have what it sees as an outdated view of the retailer.
Among the efforts, it plans to expand drone deliveries to 100 stores in three states in the coming year through drone operator Wing. Customers can already get drone deliveries in parts of Northwest Arkansas and the Dallas-Fort Worth area.
Also starting in early July, Walmart will carry a new private brand of clothing, Weekend Academy. The retailer designed the new brand, which will debut with 65 clothing, footwear and accessory items for tween girls and boys, with most products under $15.
Gypsy Jo Diessner, vice president of kids fashion for Walmart U.S., said the brand will land on shelves in time for back-to-school season. She said it caters to Gen Alpha, a fashion-forward young customer who has fewer options than younger kids, teens and adults.
Walmart's plan to reinvent itself for a new kind of customer perhaps showed most in an early glimpse of ad campaign shown to employees gathered for the Associates Celebration at the University of Arkansas' Bud Walton Arena.
The TV spots, which feature actors Walton Goggins of HBO's "The White Lotus" and Stephanie Beatriz of "Brooklyn Nine-Nine," show off Walmart merchandise and delivery options that may surprise some shoppers.
It carries the tagline, "Who knew?"