Retailers roll out summer deals for inflation-weary consumers. Here’s where.

Americans who spend Memorial Day evaluating online and in-store sales may find more reasons to celebrate the return of warmer weather. Major retailers are ramping up discounts in the summer months, hoping to entice inflation-weary consumers to open their wallets.

Target, Walmart and other chains have implemented price cuts — some permanent, others temporary — with the stated goal of providing some relief to their customers. The reductions, which mainly involve food, are being introduced as Inflation showed its first sign of slowing down this year, but not enough for consumers struggling to pay for basic necessities as well as rent and car insurance.

The latest quarterly results released by retailers Walmart, Macy’s and Ralph Lauren showed that consumers continued to spend in their stores. However, several CEOs, including the heads of McDonald’s, Starbucks and home furnishings retailer Home Depot, have noted a decline in sales as people become more price conscious and more demanding.

One January survey by the consulting firm Revenue Management Solutions found that about 25% of people earning less than $50,000 were cutting out fast foodpointing to cost as a concern.

“Retailers recognize that unless they reduce some prices, they will struggle to keep the customers they have gained,” said Neil Saunders, managing director at data analytics and consultancy firm GlobalData. “The consumer is really fed up with inflation and is starting to take action in terms of where they buy, how they buy and how much they buy.”

For now, companies seem to be pursuing reward points programs, discounts and mobile applications in an effort to keep customers loyal. But McDonald’s CEO Chris Kempczinski acknowledged the impact of last month’s price hike on an earnings call.

“Consumers continue to be even more demanding with every dollar they spend as they face high prices on their daily spending, which is putting pressure on the industry,” said Kempczinski. “[I]It is imperative that we continue to keep accessibility at the forefront for our customers.”

Home Depot Sales continued to soften in the first quarter as Americans are pulling back on big home remodeling projects like bathrooms and kitchens, and that’s hurting Home Depot, Saunders said.

Sales at the country’s largest home improvement retailer fell 2.3% to $36.42 billion in the period ended April 28, just below the $36.65 billion expected by analysts surveyed by Zacks Investment Research . It was the third consecutive quarter of declining sales for retailers, who have seen sales soar during the pandemic.

“Overall, Home Depot remains a formidable business. The current challenges are all caused by a period of upheaval in the consumer economy rather than any mistakes made by the company. Still, we believe the next year will be a continuous reboot,” he said.

Price war taking hold

While discounts are an everyday tool in retail, Saunders said these price cuts mark the first major “price war” since inflation began to take hold.

Higher-income shoppers looking to save money have helped Walmart maintain strong sales in recent quarters. But earlier this month, the country’s largest retailer expanded its price reductions — temporary discounts that can last a few months — to nearly 7,000 grocery items, a 45% increase. Items include a 28-ounce can of Bush’s Baked Beans marked down to $2.22 from $2.48 and a 24-ounce pack of 12-ounce Diet Coke priced at $12.78 , from US$14.28.

Company executives said the Bentonville, Arkansas-based retailer is seeing evidence that more people are eating at home versus eating out. Walmart believes its discounts will help the business for the rest of the year.

“We will lead on price, we will manage our (profit) margins and we will be the Walmart we have always been,” CEO Doug McMillon told analysts earlier this month.

Not to be outdone by its closest competitor, Target last week cut prices on 1,500 items and said it planned to make price reductions on another 3,500 this summer. The initiative mainly applies to food, beverages and essential household items. For example, Clorox scented wipes that previously cost $5.79 are now on shelves for $4.99. Huggies wipes, which used to cost $1.19, are now 99 cents.

Low-cost supermarket chain Aldi said earlier this month it was slashing prices on 250 products, including barbecue and picnic favorites, as part of a promotion that will run until Labor Day.

Fast food promotions

McDonald’s plans to launch a limited-time service $5 Meal Deal in the US next month to combat slowing sales and customer frustration with high prices. Burger King recently announced is planning to offer its own $5 value promotion before McDonald’s.

Other fast-food chains offering new promotions include Wendy’s, which recently announced a new potato combo and egg breakfast sandwich for $3.

Arko Corp., a large operator of convenience stores in rural areas and small towns, is launching its most aggressive in-depth deals in about 20 years, both for members of its free loyalty program and other customers, from according to Arie Kotler, the company’s chairman, president and CEO. For example, members of Arko’s free loyalty program who purchase two 12-packs of Pepsi drinks get a free pizza. Promotions started on May 15th and end on September 3rd.

Kotler said he focused on essential items that people use to feed their families after observing that the cumulative effects of higher gas prices and inflation in other areas caused customers to decline compared to the previous year.

“Over the last two quarters, we have seen the trend of consumers cutting back, consumers coming in less frequently and consumers reducing their purchases,” he said.

Other retailers

In the non-food category, crafts chain Michaels last month reduced prices on frequently purchased items such as paints, markers and artists’ canvas. Price reductions ranged from 15% to as much as 40%. Michaels said the cuts are expected to be permanent.

Many retailers said their aim was to offer some relief to shoppers. But Michaels said its new discounts have brought prices on some things down to where they were in 2019.

“Our intent with these cuts is to ensure we deliver customer value,” said The Michaels Companies. “We see this as an investment in customer loyalty more than anything else.”

Target said it was difficult to compare the current cost of its marked-down products to a specific time period, since inflation levels are different for each item and markdowns vary by item. The retailer said this month is reducing prices across 5,000 different items as consumers feel pressure to maximize their budgets. Discounted products include fruit, milk, meat, peanut butter, pet food, paper towels and more.

Food prices soar

The Bureau of Labor Statistics, which tracks consumer prices, said the average price of a two-liter bottle of soda in April was $2.27. That compares to $1.53 in the same month five years ago. A pound of white bread averaged $2 last month but $1.29 in April 2019. A pound of ground chuck that averaged $5.28 in April cost $3.91 five years ago back.

US consumer confidence worsened for the third consecutive month in April, as Americans continued to worry about their near-term financial future, according to the latest report released late last month by the Conference Board, a business research group.

With shoppers focusing more on bargains, particularly online, retailers are trying to get customers back into their stores. Target this month reported its fourth consecutive quarterly decline in comparable sales — those from stores or digital channels operating for at least 12 months.