- Walmart Chief Financial Officer Brett Biggs said the retailer’s own data shows shoppers are paying attention to pricing, even if they aren’t trading down to cheaper brands or buying smaller containers.
- The big-box retailer said it had the same amount of rollbacks, or temporary price reductions, as it did at the end of the first quarter in 2021.
- “During periods of inflation like this, middle-income families, lower middle-income families, even wealthier families become more price sensitive,” CEO Doug McMillon said on an earnings call. “And that’s to our advantage.”
Walmart Chief Financial Officer Brett Biggs said buyers aren’t trading down to cheaper brands, buying smaller packages or skipping over discretionary products – but they are paying attention to growing pricing.
“We haven’t seen any notable changes at this point in how they’re shopping,” Biggs said in a Thursday interview with CNBC. But, he added, “we do know, we’ve seen and we heard via our own studies that people are clearly focused on inflation and they’re seeing that in their daily lives.”
Inflation is driving up costs of food, fuel, vehicles and other everyday products across the country. The consumer price index grew by 7.5 percent in January compared with the year-earlier period, the fastest jump in four decades, according to the Labor Department. Food expenditures have up 7 percent over the past year — and groceries is Walmart’s top sales category.
Those growing expenses have become a focal area for investors, who are monitoring to see if and when Americans’ spending patterns change. Household budgets may get pinched by a second issue, too: As the Covid omicron wave recedes, consumers may start to spend more on transportation or dining out.
Walmart’s fiscal fourth-quarter earnings beat Wall Street’s estimates and the firm reiterated its outlook for the year. A part of the retailer’s sales came from higher prices, although same-store sales, a critical indicator, expanded by 5.6 percent in the U.S. More than half of Walmart’s revenue gain came from an increase in travels to the store and visits to its website, rather than inflation.
Biggs said the average American consumer “is still in terrific shape” because to a confluence of factors: low unemployment, rising incomes and a surge in household savings during the pandemic. That may help explain why they are not purchasing differently.
He said the store has both customers and shareholders in mind as it tries to tread the line between keeping prices low and profits high. He said Walmart attempts to take a balanced approach when it boosts pricing on some grocery goods and not others.
“Even though you may get costs being passed down in one section of the [shopping] basket, you may be able to do certain things in the other portion of the basket to make it work overall,” Biggs said.
In shop aisles, Walmart utilizes giant banners to offer temporary price reductions — dubbed rollbacks. Walmart U.S. CEO John Furner stated on the earnings call Thursday that the store had the same amount of rollbacks now as it did at the end of the first quarter in 2021.
CEO Doug McMillon stated during the call that rollbacks appeal into customers’ emotions and signal Walmart is still giving value amid inflation and uncertainty.
Many big consumer-goods businesses sold on Walmart shelves, such as PepsiCo, Coca-Cola and Procter & Gamble, have already boosted prices – and warned further increases may be on the way.
McMillon said the company has frequent interactions with brands and rely on its lengthy relationships with them to hold down pricing.
“The quantity of communication between us and suppliers is always high,” he said. “It’s extremely high right now.”
He claimed the business knows how to overcome rises in inflation because of its experience weathering comparable periods in Mexico and portions of South America. Plus, he noted, when shoppers focus on pricing, they tend to purchase more at Walmart.
“During periods of inflation like this, middle-income families, lower middle-income families, even wealthy families become more price sensitive,” McMillon added. “And that’s to our advantage.”
