- Walmart said inflation was flat in its latest quarter, and revenue growth came from selling more items and drawing more visits to its stores and website, rather than higher prices.
- Yet prices have remained high in some parts of the store, such as dry groceries and processed foods.
- Prices at consumer brands, including Walmart, have faced more scrutiny from both consumers and politicians.
Prices of many groceries and other items have fallen at Walmart, according to CEO Doug McMillon.
Yet the leader of the nation’s largest retailer said Thursday that inflation “has been more stubborn” in one particular part of the store: The aisles that carry dry groceries and processed foods. Those include items like carbonated soft drinks.
On a call after the discounter posted second-quarter earnings, he said Walmart has pressured suppliers that stock its shelves to cut prices. But he called on those companies to do more.
“We have less upward pressure, but there are some that are still talking about cost increases, and we’re fighting back on that aggressively because we think prices need to come down,” he said.
Walmart’s overall inflation was flat for the quarter, and revenue growth came from selling more units, not charging higher prices, Chief Financial Officer John David Rainey told CNBC. But price dynamics weren’t consistent across products: prices continued to go up for dairy, eggs, sugar and meat, and leveled off or dropped for items including pet food, apples, potatoes, strawberries, sporting goods and lawn and garden items.
Walmart’s quarterly results sparked a rally of other retail stocks, including Target, Best Buy and Macy’s on Thursday. Both the big-box discounter’s results and better-than-expected retail sales numbers defied concerns of a consumer slowdown.
Walmart beat on the top and bottom line and raised its forecast to reflect a stronger first half of the year. Rainey told CNBC consumers have continued to be “choiceful, discerning [and] value-seeking,” but the company’s leaders “don’t see any additional fraying of consumer health.”
All consumer brands, including Walmart, have been under more scrutiny from shoppers and even politicians as frustration with pricier goods persists — and McMillon’s comments about Walmart’s suppliers underscore how much pressure grocers have faced. Walmart drew criticism on TikTok for rolling out electronic price labels for store shelves, with some users contending the company will use the technology to hike prices when demand spikes. (Walmart, for its part, has said it has no plans to change its approach to pricing and added the new price tags to save store workers’ time.)
Many brands have taken pains to emphasize value or roll out new deals, particularly as consumers get more selective about where they spend their dollars.
McDonald’s, for example, launched a $5 value meal in late June and decided to extend the offer in most markets. Target in late May said it would cut prices on about 5,000 frequently shopped items throughout the summer, such as peanut butter, milk and meat.
Walmart is also touting discounts. The retailer said it had 7,200 “rollbacks,” its term for short-term deals, across categories in the quarter that ended July 31. That number included a 35% year-over-year increase in the number of rollbacks for food.
While Walmart’s profits are growing faster than sales, McMillon said that’s because of growth outside of retail in higher-margin businesses like advertising — not higher prices on goods.
“We’re not raising prices. We’re lowering prices,” McMillon said. “We don’t want product margins to go up. When we talk about margin improvement in our company, it’s business mix.”
Source: Business - cnbc.com
