Inflation is opportunity to win customers

As the cost of groceries and household goods rises, Walmart CEO Doug McMillon said the big-box retailer will lean into its longtime strategy: Undercutting rivals on price.

In an interview with CNBC’s “Squawk on the Street” on Tuesday, he said the company sees inflation as an opportunity to gain market share and emphasize its commitment to value.

“That’s our purpose,” he said. “We save people money and help them live a better life. Those are the words that came out of [Walmart founder] Sam Walton’s mouth. He loved to fight inflation. So do we.”

That means Walmart is absorbing rather than passing on some of the higher costs that have come from fuel, shipping, labor and more — even as that weighs on short-term profitability, he said. Its cost inflation is higher than its retail inflation.

He said the retailer is striking a balance of delivering for shareholders and staying to true to its discounter roots for customers.

“We’re proud to try and hold prices down,” he said. “Our conversations with suppliers today, tomorrow will be ‘How can you help us roll back prices and swim upstream and be different than everybody else?'”

Inflation hit a 30-year high in September, as food, gas and more grew more expensive, according to the Commerce Department. The persistence of those higher prices has surprised some economic leaders and government officials, including Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell.

Walmart, the country’s largest private employer, topped analysts’ expectations for fiscal third-quarter earnings on Tuesday. One of its strengths in the three-month period was its grocery business. Grocery sales were up nearly 10% year over year, as customers returned to stores and the company saw low to mid single-digit inflation.

Shares of the company were down about 2% early Tuesday. Walmart stock has lagged behind the S&P 500. Its shares are up about 2% this year versus about 30% for the S&P.

Source link


Please enter your comment!
Please enter your name here