A customer pushes a shopping cart through the aisles of a Walmart store in the Porter Ranch section of Los Angeles.
Kevork Djansezian | Kevork Djansezian Reuters
Prices for many groceries and other items have dropped WalmartCEO Doug McMillon said.
However, the leader of the largest U.S. retailer said Thursday that inflation is “more stubborn” in one specific area of stores: the aisles that hold dry goods and processed foods. This includes items such as carbonated soft drinks.
On a conference call after the discounter reported second-quarter earnings, he said Walmart has pressured suppliers on its shelves to lower prices. But he called on the companies to do more.
“We have less upward pressure, but some people are still talking about cost increases and we are fighting back aggressively because we think prices need to come down,” he said.
Walmart Chief Financial Officer John David Rainey told CNBC that overall inflation was flat this quarter and revenue growth came from selling more merchandise rather than charging higher prices. But price dynamics are inconsistent across products: Dairy products, eggs, sugar and meat prices continue to rise, while prices for products such as pet food, apples, potatoes, strawberries, sporting goods and lawn and garden supplies have leveled off or declined. .
Walmart’s quarterly results sparked gains in other retail stocks, including Target, best buy and macy’s department store Thursday. The big discounter’s earnings and better-than-expected retail sales defied fears of a slowdown in consumers.
Walmart posted strong sales and profits and raised its forecast to reflect a strong first half of the year. Rainey told CNBC that consumers remain “selective, discerning (and) value-driven,” but the company’s leaders “don’t see any additional harm to consumer health.”
All consumer brands, including Walmart, have come under greater scrutiny from shoppers and even politicians as dissatisfaction over pricey goods persists, and MacMillan’s comments about Walmart suppliers underscore how much pressure grocers are facing. Walmart painted TikTok has been criticized for rolling out electronic price tags on store shelves, with some users believing the company will use the technology to raise prices when demand surges. (Walmart, for its part, said it has no plans to change its pricing and is adding new price tags to save store workers time.)
Many brands are taking pains to emphasize value or launch new offers, especially as consumers become more discerning about where they spend their money.
McDonald’sFor example, it launched a $5 Value Meal in late June and decided to expand the offer in most markets. Target stated for late May It will reduce prices throughout the summer on about 5,000 frequently purchased items, such as peanut butter, milk and meat.
Walmart is also on sale. The retailer said it had 7,200 “rollbacks” across categories in the quarter ended July 31, with food rollbacks up 35% year-on-year.
McMillon said that while Walmart’s profits grew faster than sales, that was due to growth in higher-margin businesses outside of retail, such as advertising, rather than rising commodity prices.
“We’re not going to raise prices. We’re going to lower prices,” McMillon said. “We don’t expect product margins to go up. When we talk about margin improvement as a company, we’re talking about the business mix.”
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