Wal-Mart CEO Doug McMillon just revealed a bleak outlook for the state of the global economy.
In an interview on CNBC, McMillon was asked to comment on the US economy.
He shrugged and said, “It’s steady. It’s OK.”
He went on to address back-to-school sales and sounded unimpressed, calling them “pretty good.”
Back-to-school sales are a strong indicator for the holiday season, which is the most important shopping period of the year.
Looking ahead to the holidays, McMillon said, “Christmas will be fine.”
When asked why a drop in gas prices hasn’t provided a bigger boost to sales in the US, McMillon said that consumers “had debt to address and other things going on.”
“They are just balancing in where they manage their budgets,” he said.
Many Americans are watching their spending despite lower gas prices, writes Lindsey Piegza, chief economist at Sterne Agee.
“Consumers are increasingly familiar with energy price reprieve from summer gas prices and no longer adjust their long-term spending habits as much, or at all, based on short-term price fluctuations,” Piegza writes.
And while gas prices are lower, the benefit is offset by higher housing and utility costs, according to Piegza.
Health insurance premiums have increased between 39% and 56% since early 2013, meaning additional costs of $US230 per month for the average family.
The lacklustre job market is also contributing to poor sales at middle-market retailers like Gap and Macy’s, Piegza writes.
McMillon said he’s less concerned about the US economy, however, and more worried about China.
“China’s a little tougher,” he said. “You just can’t think about China as a one-year endeavour, it’s a longer endeavour.”
Wal-Mart announced earlier this year that it would be investing heavily in China to expand its store footprint by one third, as well as remodel existing stores.
McMillon made the remarks shortly before Wal-Mart announced Wednesday that it was cutting its profit outlook for the next two years, forecasting a 6%-12% earnings decline.
Following the news, shares of the nearly $US200 billion company fell as much as 9%, marking the biggest single-day decline in at least six years.
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