Walmart says prices are falling except in one key area

Prices of many food and other items have dropped to Clothing storeaccording to CEO Doug McMillon.

Yet the leader of the nation’s largest retailer said Thursday that inflation “has been most stubborn” in one part of the store: the aisles that sell dry groceries and processed foods. That includes items like soda.

In a call after the discounter reported second-quarter earnings, he said Walmart has pressured suppliers that stock its shelves to cut prices. But he asked those companies to do more.

“We have less upward pressure, but there are people who continue to talk about cost increases and we are aggressively fighting that 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 Vscek. However, price dynamics were not uniform across all products: prices continued to rise for dairy products, eggs, sugar and meat, while they stabilized or fell for items such as pet food, apples, potatoes, strawberries, sporting goods and lawn and garden products.

Walmart’s quarterly results sparked a rally in other retail stocks, including Target, Best buy AND from Macy Thursday. Both the big-box discounter’s results and better-than-expected retail sales numbers defied concerns about a consumer slowdown.

Walmart topped the top and bottom lines and raised its forecast to reflect a stronger first half of the year. Rainey told Vscek that consumers continued to be “choosing, demanding [and] “search for value,” but company executives “see no further harm to consumers’ health.”

All consumer brands, including Walmart, have come under increased scrutiny from shoppers and even politicians as frustration over higher-priced goods persists, and McMillon’s comments about Walmart’s suppliers underscore how much pressure grocery retailers have faced. Walmart has drawn TikTok has faced criticism for rolling out 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 pricing approach and added the new price tags to save store employees time.)

Many brands have made efforts to emphasize value or launch new offerings, especially as consumers become more selective about how they spend their money.

McDonald’sFor example, it launched a $5 meal deal in late June and has since expanded the offer to most markets. Target said in late May would cut prices on about 5,000 items frequently purchased during 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 all categories in the quarter 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 due to growth outside of retail in higher-margin activities, such as advertising, rather than rising prices for 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 improving margins in our company, it’s about business mix.”