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Even as inflation finally appears to be cooling off, there are signs that price fatigue is starting to hit consumers where it counts: their wallets. As inflation has risen, some companies have been able to raise prices, while others have reduced the size of their packages, a process known as shrinkflation.
CNBC’s Jim Cramer believes consumers are ready to fight back, and their spending habits could change the trajectory of many stocks. “Consumers are finally saying no. They’re fighting back, demanding deals,” Cramer said on a recent episode of Mad Money. Cramer’s take is that some hotel and travel stocks could face tough times ahead, calling recent earnings “signs of a rebellion” emerging in consumer behavior. He called recent disappointing attendance at Comcast’s (NASDAQ:CMCSA) theme park as another sign that people aren’t spending like they used to in 2022.
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Cramer also cited consumer brands including Nike (NYSE:NKE) and Estee Lauder (NYSE:EL) as examples of companies that may be too expensive to attract consumers right now. He predicts that this is just the beginning, not the end, and that consumers will take revenge on anyone who keeps prices high. That could be encouraging news for several dividend-paying companies that appeal to value-conscious consumers.
Where are the values
Over the past six months, many companies have become aware of customer dissatisfaction and have adjusted their prices accordingly. This could be beneficial for their bottom line.
Walmart (NYSE:WMT) is one of the biggest beneficiaries of price sensitivity. The company has accelerated the pace of price cuts on many of its most popular products. This approach is not just about connecting with Walmart’s traditional base. The company is attracting a broader audience to its stores. On its most recent earnings call, Walmart CFO John David Rainey highlighted how Walmart is reaching out to a broader audience. “We are seeing higher engagement across all income cohorts, with higher-income households continuing to account for the majority of share gains.”
Walmart’s total revenue increased by 5.8% in the most recent quarter. Although its dividend yield is just 1.18% and the annual dividend is $0.83, the company’s payouts have been consistent. It earned Dividend King status in 2024, increasing its dividend for 51 years. Walmart repurchased $1.1 billion worth of stock in the most recent quarter. We expect to learn more about Walmart’s pricing strategy when it reports its earnings on August 15.
McDonald’s (NYSE:MCD) is another company catering to value shoppers. The company plans to keep its $5 meal deal beyond its four-week test. The test has worked well with consumers, drawing more people into restaurants. The meal includes a sandwich, chicken nuggets, fries, and a drink. In its latest quarterly earnings call, CEO Chris Kempczinski summed it up by saying, “As consumers increasingly demand more from every dollar spent, we will continue to earn their business by delivering trusted, premium everyday value and exceptional execution in our restaurants.” McDonald’s has enjoyed 13 consecutive quarters of sales growth. The company has a forward dividend yield of 2.64% and pays an annual dividend of $6.68. We’ll likely learn more about the effectiveness of the value menu pricing during its July 29 earnings call.
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In May, Target (NYSE: TGT) announced price cuts on more than 5,000 items. During Target’s first-quarter earnings call, CEO Brian Cornell emphasized the importance of this strategy: “While our team is always committed to value, this is especially important in today’s environment, where consumers are looking for ways to stretch their budgets in the face of stubbornly high prices.”
Target’s comparable sales fell 3.7% in the first quarter, and the company has had to deal with perceptions that it is more expensive than other options. One of its major efforts has been to revamp the Target Circle loyalty program and promotions like Target Circle Week. With the big back-to-school shopping season just around the corner, expect Target to work hard to get the savings message across to consumers. Target announced it is raising its quarterly dividend to $1.12, a 1.8% increase. It currently has a forward dividend yield of 3.06% and 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 being more responsive to their customers’ needs. As investors, we’ll need to pay close attention to their stocks, because some companies that ignore the appeal of cash-strapped consumers could be left behind.
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This article by Jim Cramer says a consumer rebellion is coming, which could be good news for these dividend stocks originally appeared on Benzinga.com