Walmart Inc. knows where to put its price gap to achieve profitable growth, Food Business News reports. That message, delivered by C. Douglas McMillon, president and chief executive officer of Walmart, provides a glimpse into how aggressive retailers have to be on food pricing now.
As inflation rises, consumers are feeling more pressure at the grocery store, which is reflected in increased demand for grocery private brands, particularly meat, Walmart executives said during a first-quarter earnings call.
Trading to Private Brands
Not all customers can absorb the big price increases, Walmart said. Stores are seeing more customers trade from brands to private brands.
“That’s where they need our help,” McMillon explained on the call. “And so we do … stay focused on opening price point food items, loaf of bread, a gallon of milk, a can of tuna, mac and cheese, protein categories, are we helping a family that’s at the lower end of the income scale be able to afford to feed their families during this inflationary time. And given that stimulus checks happened last year, there was some benefit to some of those folks that is eroding over time. And as we look at the rest of the year, that’s something that’s on our mind.”
Executives remain bullish on their food and consumables business. They shared that Walmart’s grocery business gained market share and had a higher average ticket despite lapping last year’s significant benefits from U.S. economic stimulus actions.
“U.S. inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than we expected. We’re adjusting and will balance the needs of our customers for value with the need to deliver profit growth for our future,” McMillon said.
Walmart Earnings Takes a Hit
Walmart reported a 23% decline in first-quarter consolidated operating income and cut its full-year earnings outlook amid the impact of inflationary pressures on consumers, and as it contended with higher costs for labor and fuel, Food Business News reports.
“Part of what’s at play here is you’ve got food inflation moving up, but we’ve got general merchandise categories like apparel and some of our hardline categories to play with,” McMillon said on the call. “And the beauty of it is customers are even more price sensitive right now... fuel prices are high, food prices are high. And so when you bring something down in sporting goods or hardware, one of these other categories, they noticed even more than they would notice before, and that makes the elasticity impact be different than it would be otherwise, which blends the mix up.”
More from Farm Journal’s PORK:
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