“Wal-Mart Stores Inc. WMT +0.11% on Thursday joined a parade of retailers, restaurants and consumer-goods companies worried about the economic impact of the recently restored federal payroll tax that has left Americans with less money to spend.
The world’s largest retailer, Burger King Worldwide Inc., BKW +1.31% Kraft Foods Group Inc. KRFT +0.65% and others are lowering forecasts and adjusting sales and marketing strategies, expecting consumers with smaller paychecks to dine out less and trade down to less expensive purchases.
The expiration of the payroll tax cuts that knocked 2% off consumers’ take-home pay is having an impact, these companies say. It will ding a household with $65,000 in annual income $1,300 this year, and shift $110 billion overall out of consumers’ hands, estimates Citigroup C +0.92% .
Now, Wal-Mart is stocking more of its shelves with cheaper products, and smaller-size packages of diapers, toilet paper and snacks. Burger King is cutting its Whopper Jr. sandwich to $1.29 from about $2, and focusing advertising on its value menu items rather than higher-price salads or smoothies.
Kraft and meat supplier Tyson Foods Inc. TSN +1.24% are introducing more lower-priced products to help restaurants and supermarkets adapt to the consumer spending downshift.
These companies say the changes could be long-lasting and are revamping operations to better cater to consumers pinched by higher taxes, stagnant wage growth and rising gasoline prices, which jumped nearly 50 cents a gallon in the past month alone.
Less take-home pay is causing 45.7% of consumers to curtail spending, according to a survey released on Thursday by the National Retail Federation, a trade group. A quarter of consumers are delaying big-ticket purchases, a third are reducing restaurant visits, and about a fifth of shoppers are spending less on groceries, it said….”
If you enjoy the content at iBankCoin, please follow us on Twitter
