Walgreens Price Cuts Confirm More Consumers Are Getting Picky

It’s knives out for US retailers, with Walgreens being the latest to cut prices on thousands of its products to stay competitive and adapt to changing consumer spending habits. 

Grocery Store Slashes

Earlier this month, just two days before a less-than-stellar first-quarter earnings report, Target began cutting prices on 5,000 grocery store items including milk, diapers, drinks, fruit, and cleaning products. The move came as customers were spending less — Q1 sales fell 3.7% year-over-year — and possibly finding better deals at Walmart, which started lowering prices to pre-pandemic levels in March. 

In the past week, Amazon said it was slashing grocery prices at its Fresh chain by up to 30% to lure back inflation-weary customers. Aldi has begun reducing prices on more than 250 items, which the grocery chain says will pass along $100 million in savings to customers.

And now, Walgreens — which has seen its share price drop nearly 45% this year — is following suit:

• On Wednesday, Walgreens lowered prices on more than 1,500 items including vitamins, chips, lotion, and Squishmallow plushies. In a release, the company’s chief customer officer, Tracey Brown, said, “Walgreens understands our customers are under financial strain and struggle to purchase everyday essentials.”
• Walgreens actually reported solid Q1 revenue, increasing 6.3% from a year ago to roughly $37 billion and beating Wall Street’s expectations. However, it also dropped its guidance to reflect the “challenging retail environment in the US.” Plus, it took a major writedown of nearly $6 billion on its VillageMD clinics.

An analysis from The Wall Street Journal found that in addition to eating out less and spending less at the grocery store, many price-sensitive consumers are switching from brand-name to in-house items. Instead of reaching for Kellogg’s Rice Krispies, they might opt for Crispy Rice from Shop Rite’s Bowl & Basket line. Huge difference.

Let’s Get Some Shoes: As grocery chains slash prices to stay competitive, higher-end retailers have somehow managed to keep their knives sheathed. On Wednesday, Dick’s Sporting Goods reported 5.3% sales growth in the first quarter — more than twice what Wall Street expected — as customers spent more on sneakers and athletic gear. Abercrombie & Fitch reported that revenue increased for the sixth consecutive quarter and raised its full-year outlook, sending its share price up roughly 30% Wednesday. If consumers keep spending like this on clothes in this economy, we’ll eat our hat.