For several consecutive quarters, Walmart has been able to leverage inflation to its advantage in groceries, undercutting competitors’ prices. Today, even the world’s largest grocer is feeling the pressure of soaring prices.
Read more: Walmart turns consumer price concerns into grocery share gains
During a call with analysts on Tuesday (May 17) to discuss the company’s first quarter results, Walmart President and CEO Doug McMillon discussed the current challenge food inflation poses for the retailer.
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“While we have experienced high levels of inflation in our international markets over the years, such high and rapidly changing US inflation, both in food and general merchandise, is unusual,” he said. he declares. “We will control what we can control, reduce our inventory level and keep prices as low as possible, especially on opening-priced food products, while improving our earnings performance.”
Food prices continue to rise at an alarming rate. The April consumer price index for all urban consumers (CPI-U), released by the U.S. Bureau of Labor Statistics (BLS) on Wednesday (May 11), showed that home food prices (c’ i.e. groceries) were up 1% month-over-month in April and 11% year-over-year. The prices of all items do not inflate at the same rate, so some foods are considerably more expensive, while others remain relatively constant.
Yet, although inflation can pose problems, Walmart is better positioned than smaller businesses to keep prices low, attractive to low-income consumers.
“Not everyone can afford to absorb this – that’s where they need our help,” McMillon said, adding that the company is focusing on essential categories where it can keep prices low for those who find it difficult to buy food.
Additionally, Brett Biggs, the company’s executive vice president and chief financial officer, noted that these concerns are translating into “increased penetration of private-label grocery stores as consumers choose lower prices over trusted brands. John Furner, president and CEO of the company’s US operations, added that this change is particularly pronounced in the protein and dairy categories.
Along with inflationary challenges, many grocers are also grappling with supply chain issues, with out-of-stocks threatening shopper loyalty, according to data from PYMNTS’ January study, “Decoding Customer Affinity: The Customer Loyalty to Merchants Survey 2022”, created in collaboration with Toshiba Global Commerce Solutions.
Get the report: The 2022 Merchant Customer Loyalty Survey
The report, which is based on a survey of more than 2,000 U.S. consumers, noted that 51% of shoppers said making sure the groceries they want are in stock and available at the purchase is key to their continued customer base from a given merchant, and 6% of buyers cited this as the most influential merchant selection factor for them.
Discussing the company’s grocery business, Furner noted that Walmart is “more satisfied with our inventory levels compared to what we have been in previous quarters.”