Walmart cuts grocery prices, despite inflationary pressures

Walmart CEO Doug McMillon has reported a decline in prices for many groceries and other items at the retail giant, although inflation has been more persistent in the grocery and processed food aisles. Walmart has urged suppliers to lower prices, with McMillon insisting that costs must come down even further. The company's headline inflation was flat in the quarter, with revenue growth driven by increased unit sales rather than price increases. However, price trends varied by product, with increases seen in dairy products, eggs, sugar and meat, while prices for items such as pet food, apples, potatoes, strawberries, sporting goods and lawn and garden goods were flat or down.

Walmart's quarterly results led to gains in other retail stocks, including Target, Best Buy and Macy's. The company beat high and low expectations and raised its forecast for the first half of the year. CFO John David Rainey said consumers remain discerning and looking for value, with no deterioration in consumer health seen.

McMillon's comments highlight the pressure grocers face as consumers and politicians scrutinize rising commodity prices. Walmart has recently faced backlash over TikTok for introducing electronic price tags on store shelves, with critics suggesting the technology could be used to raise prices during periods of high demand. The retailer, however, insists it has no plans to change its pricing strategy and introduced the new price tags to save employees time.

Many brands are emphasizing value and introducing new offerings as consumers become more selective about their spending. Walmart, for example, reported 7,200 “kickbacks,” or short-term deals, across various categories in the quarter that ended July 31, a 35% year-over-year increase in food returns. While the company's profits are growing faster than sales, McMillon attributes that to growth in higher-margin businesses like advertising, rather than rising commodity prices. “We are not raising prices. We are lowering prices”, he said, stressing that the company does not want product margins to increase.