A customer pushes her shopping cart through the aisles of a Walmart store in the Porter Ranch section of Los Angeles.
Kevork Djansezian | Reuters
Prices of many foods and other items have fallen in Walmartaccording to CEO Doug McMillon.
But the head of the nation's largest retailer said Thursday that inflation “has been most persistent” in one particular part of the store: the aisles that sell dry goods and processed foods, including items such as soft drinks.
On a call after the discount chain released its second-quarter earnings, he said Walmart has pressured suppliers that stock its shelves to cut prices, but asked those companies to do more.
“We have less upward pressure, but there are some who are still talking about cost increases, and we are fighting that aggressively because we believe prices need to come down,” he said.
Walmart's overall inflation remained stable during 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 were not consistent across all products: prices continued to rise for dairy products, eggs, sugar and meat, and stabilized or fell for items such as pet food, apples, potatoes, strawberries, sporting goods and garden supplies.
Walmart's quarterly results sparked a rally in other retail stocks, including Aim, The best buy and Macy's Better-than-expected results from major discount chains and retail sales figures on Thursday defied fears of a consumer slowdown.
Walmart beat expectations on top and bottom lines and raised its outlook to reflect a stronger first half of the year. Rainey told CNBC that consumers have remained “choosy and discerning.” [and] quest for value,” but company leaders “see no further deterioration in consumer health.”
All consumer brands, including Walmart, have come under increased scrutiny from shoppers and even politicians as frustration with more expensive products persists, and McMillon's comments about Walmart suppliers underscore how much pressure supermarkets have faced. Walmart attracted TikTok has received criticism for its implementation of electronic price tags on store shelves, with some users arguing that the company will use the technology to raise prices when demand increases. (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 been scrambling to highlight value or launch new offerings, particularly as consumers become more selective about where they spend their money.
McDonald'sFor example, it launched a $5 meal at the end of June and decided to extend the offer in most markets. Target said in late May It would reduce prices on about 5,000 frequently purchased summer items, such as peanut butter, milk and meat.
Walmart is also promoting discounts. The retailer said it had 7,200 “reversals” — its term for short-term deals — across all categories in the quarter that ended July 31. That figure included a 35% year-over-year increase in the number of reversals for food.
While Walmart's profits are growing faster than sales, McMillon said that's due to growth outside of retail in higher-margin businesses like advertising, not higher prices on products.
“We're not raising prices, we're lowering them,” McMillon said. “We don't want to drive margins up on products. When we talk about improving margins in our business, we're talking about business mix.”
