The topic of inflation relief is one most consumers can get behind. Inflation has been stickier than many expected, particularly in key categories. Indeed, when we’re talking about essentials such as food and consumer staples, there isn’t much consumers can do. However, a number of companies are seeing this inflationary environment as one that can be beneficial, if there’s room to cut prices.
We’re now seeing evidence more price cuts are taking hold, as companies look to attract more consumers to shop both online and physically in stores. Generally, the items seeing the most significant price cuts are essentials, frozen goods and other discretionary purchases.
Increasing prices because of inflation has led to cautious spending from consumers. Many shoppers are now prioritizing needs over wants, setting a tight budget for shopping. This shift has been a challenge for the U.S. economy, which is currently relying heavily on consumer spending.
Inflation is still hovering around 3.4% in March, a 0.3% increase from February, as per data from the U.S. Bureau of Labor Statistics. NerdWallet says from January 2020 to April 2024, consumer price inflation has totaled close to 20%. For those in the lower income brackets, that’s not a good thing.
That said, let’s dive into where consumers are seeing the most inflation relief, and from which retailers, right now.
Walgreens
Reducing over 1,500 items, including toiletries, snacks and toys, Walgreens (NASDAQ:WBA) is among the top pharmacy retailers that have announced price slashes.
Competitors like Target (NYSE:TGT), Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN) have similarly cut prices. Some items worth looking out for are gummy vitamins and chips now selling for $11.99 and $1.99, respectively.
Tracey Brown, Walgreens retail president, said the company decided to support customers under financial strain; hence, the price reductions. After announcing excellent second-quarter sales expectations, WBA lowered its full-year earnings forecast due to a shift in the retail environment.
The company’s next earnings report is expected in June, but currently, shares are down 40% this year. Walgreens’ recent earnings report showed a 4.5% drop in retail sales and a 4.3% drop in sales year-over-year.
Target
Target has rolled out substantial price cuts on approximately 5,000 popular items. Having already slashed prices on 1,500 products, more reductions are in store for the summer, aiming to save consumers millions. Rick Gomez, the executive vice president, emphasized that these cuts, covering essentials such as milk, meat and diapers, reflect Target’s commitment to competitiveness and aiding consumers in managing their budgets.
Target offered lower prices on household essentials, helping consumers save during Memorial Day, the Fourth of July and back-to-school shopping. Examples of these price cuts included Good & Gather frozen chicken breasts and other frozen products. These reductions included Memorial Day discounts to help consumers celebrate the holiday.
The company reduced prices on national and popular in-house brands like Good & Gather and Everspring in critical departments such as food, household essentials and health products. New prices, marked with red tags, are accessible in-store, online and through the Target app.
Examples include Good & Gather unsalted butter at $3.79 (previously $3.99), Prime Hydration sports drinks at $1.99 (previously $2.19) and Clorox scented wipes at $4.99 (previously $5.79).
Aldi
This summer, Germany-based Aldi cut prices on 250+ items, addressing inflation worries to keep shopping affordable. Dave Rinaldo, Aldi U.S. president, stressed the need for discounts on seasonal essentials like picnic and BBQ items.
Aldi announced on May 2 its intention to cut prices, aiming to save customers around $100 million, nearly twice the savings from a similar initiative last year, which amounted to over $60 million.
Bottom Line
These price cuts from retail giants only aim to stimulate spending amidst inflation concerns. Restaurant chains like McDonald’s (NYSE:MCD) introduced fixed-price meal deals, while Michaels permanently reduced prices on popular items by up to 40%.
Despite an unexpected uptick in consumer confidence in May, lingering uncertainties remain about the impact of these discounts. Retailer bankruptcies peaked last year, but empty storefronts are quickly filled due to limited retail space availability.
Grocery chains face significant profit challenges due to small shifts in transaction volume and purchase quantity. While price reductions offer relief, they follow a substantial 26.6% price hike since 2019, compared to a mere 1.6% increase over the preceding five years.
Consumers continue to feel inflation’s impact, as most still compare current grocery costs to pre-pandemic levels, leading to “register shock” at checkout. This trend is expected to persist.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
