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Even as inflation finally appears to be cooling, there are signs that price fatigue is starting to hit consumers where it counts: their wallets. As inflation rose, some companies were able to raise prices while other consumer goods companies reduced the size of their packages, a process known as shrinkflation.
CNBC’s Jim Cramer believes consumers are ready to fight back, and that their spending habits could change the course of many stocks. “Consumers are finally saying no. They’re standing up and demanding a bargain,” Cramer said on a recent episode of Mad Money. Cramer believes some hotel and travel stocks could struggle, calling recent gains “signs of a revolt” brewing in consumer behavior. He cited the recent disappointing traffic to Comcast’s (NASDAQ:CMCSA) theme parks as another sign that people are no longer spending the way they did in 2022.
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Cramer also cited big consumer brands including Nike (NYSE:NKE) and Estee Lauder (NYSE:EL) as examples of companies that may be too expensive to appeal to consumers right now. He predicted that this is the beginning, not the end, and that consumers will retaliate against anyone who keeps prices high. That could be encouraging news for several dividend-paying companies that appeal to value-conscious consumers.
Where the values are
Over the past six months, many businesses have become increasingly aware of unhappy shoppers and are adjusting their prices accordingly, which could be good for their bottom line.
One of the biggest beneficiaries of price sensitivity is Walmart (NYSE:WMT). The company has been accelerating the pace of rollbacks and markdowns on many of its most popular products. This approach isn’t just aimed at reaching Walmart’s traditional base; the company is also attracting a broader audience to its stores. During the company’s most recent earnings call, Walmart Chief Financial Officer John David Rainey pointed to how Walmart is reaching a broader audience. “We’re seeing higher engagement across income cohorts, with high-income households continuing to drive the majority of equity gains.”
Walmart’s total revenue rose 5.8% last quarter. While its dividend yield is just 1.18% and its annual dividend is $0.83, the company’s payouts have been consistent. It achieved Dividend King status in 2024, marking an impressive 51 years of dividend increases. Walmart bought back $1.1 billion in stock last quarter. We expect to hear more about Walmart’s pricing strategy when the company reports earnings on August 15.
Another company appealing to value buyers is McDonald’s (NYSE:MCD). The company plans to keep its $5 Value Meal deal after a four-week trial. The trial performed well with consumers, bringing more people into the restaurants. The meal includes a sandwich, chicken nuggets, fries and a drink. In the company’s most recent quarterly earnings report, CEO Chris Kempczinski summed up the situation by saying, “As consumers are more discerning with every dollar they spend, we will continue to earn their visits by delivering industry-leading, reliable, everyday value and excellent execution in our restaurants.” McDonald’s has had 13 consecutive quarters of revenue growth. The company has a forward dividend yield of 2.64% and pays an annual dividend of $6.68. We’ll likely hear more about the effectiveness of the value menu pricing during the July 29 earnings call.
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In May, Target (NYSE:TGT) announced that it was cutting prices on more than 5,000 items. During Target’s first-quarter earnings call, CEO Brian Cornell emphasized the importance of this strategy, saying, “While our team has always been committed to value, it’s especially important in today’s environment as consumers look for ways to stretch their budgets in the face of persistently high prices.”
Target’s comparable sales fell 3.7% in the first quarter, and the company has struggled with the perception that it’s more expensive than other options. One of the biggest pushes has been revamping its Target Circle loyalty program and promotions like Target Circle Week. With the big back-to-school shopping season underway, we can expect Target to work hard to get its savings message across to consumers. Target announced that it was raising its quarterly dividend to $1.12, up 1.8%. It currently has a forward dividend yield of 3.06% with an annual dividend of $4.48.
Cramer cited Costco, Walmart and Amazon as potential beneficiaries of the consumer revolution, but many other companies could benefit from greater sensitivity to their customers’ needs. As investors, we’ll want to pay attention to their moves, because some companies that don’t heed the call of the cash-strapped shopper could be left behind.
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This article by Jim Cramer says a consumer revolt is coming, which could be good news for these dividend stocks originally appeared on Benzinga.com
