- Deflation could be coming, Walmart CEO Doug McMillon said.
- Prices have fallen, especially on general merchandise and on some key grocery items, he said.
- Yet the discounter struck a cautious tone, saying customers continue to watch their spending.
Shoppers may get an early present this holiday season: falling prices in many gift-giving categories.
On Thursday, Walmart CEO Doug McMillon said deflation could be coming as general merchandise and key grocery items, such as eggs, chicken and seafood get cheaper.
He said the retailer expects some of the stickier higher prices, such as the ones for pantry staples, to “start to deflate in the coming weeks and months,” too.
“In the U.S., we may be managing through a period of deflation in the months to come,” he said on the company’s Thursday earnings call. “And while that would put more unit pressure on us, we welcome it, because it’s better for our customers.”
For more than a year, consumers have coped with inflation that peaked around four-decade highs and drove up the cost of nearly everything, including groceries, rent and utilities. But McMillon’s comments echoed what the government and other retailers said earlier this week, offering signs of relief for inflation-weary consumers.
Inflation was flat month over month, according to the latest consumer price index report from the Labor Department on Tuesday. Core CPI, a metric that excludes the categories of food and energy that tend to be volatile, hit a two-year low. Home Depot CFO Richard McPhail said “the worst of the inflationary environment is behind us” on an earnings call Tuesday.
Even Thanksgiving will be lighter on Americans’ wallets compared with last year. Lower turkey prices mean that the average cost of a dinner for 10 people will be $61.17, down 4.5% from last year’s record of $64.05, according to the American Farm Bureau Federation.
Stubborn inflation has been one of the biggest challenges for retailers, including Walmart, the world’s largest retailer. It felt pressure from that again in the fiscal third quarter, even as it beat Wall Street’s sales and earnings expectations. Chief Financial Officer John David Rainey told CNBC that shoppers have waited for items to go on sale before buying them, such as holding out for a Black Friday event.
There’s still some time to go before inflation completely eases, however. Across most categories, Americans are still spending more on the same items, according to the latest CPI numbers. Food at home, electricity and haircuts cost more than they did a year ago.
At Walmart, groceries are up by a mid-single-digit percentage compared with last year, but still elevated by the high-teens percentage compared with two years ago, Rainey said.
Walmart’s McMillon said some stubborn food prices continue to be a concern.
“The pockets of disinflation we are seeing are helping, but we like to see more, faster,” he said.
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Source: Business - cnbc.com
