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Reuters/Lucy Nicholson
Maybe things will brighten up later this year.
DUBAI

Unfortunately for Walmart, Americans are actually paying off debt with the money they’re saving on gas

By Matt Phillips

The sharp drop in gas prices over the last year has put extra cash in the pockets of American consumers.

But whatever they’re doing with it, they’re not spending it at Walmart.

Earnings at the retail giant dropped 7% over last year, according to numbers released this morning (May 19), and sales were roughly flat. The company noted some interesting behavior shifts from America’s consumers, whose real take-home pay has been rising.

“Based on recent surveys, we know that many of our U.S. customers are using their tax refunds and the extra money from lower gas prices to pay down debt or put it into savings,” CEO Doug McMillon said. That is consistent with recent readings on the US savings rate, which stood at 5.3% in March after hitting a recent high of 5.7% in February.

Meanwhile, a plan to raise wages from America’s largest private employer also ate into profits during a lackluster quarter. Costs at Walmart rose 2.8% year-over-year in the first fiscal quarter of 2016, which ended April 30. Driving the rise was investments the company is making in its e-commerce platform, as well as its plan to pay higher wages to roughly 500,000 workers, which it announced back in February. (UPDATE: The company also stresses that currency fluctuations weighed on the Walmart’s net sales.)

The company started to take action on the plan during April, the last month of the quarter, when it says it raised the starting wage for all its hourly workers to $9. The plan to raise wages is intended to lower other costs over the long-term, such as the costs of staff turnover, which are large for an employer of Walmart’s size.