FAYETTEVILLE, Ark. — Walmart CEO Doug McMillon says the retail giant is closely watching its core shopper while working on ways to lower its costs and navigate 40-year-high inflation.
The largest U.S. retailer is asking its suppliers what they can do to alleviate price increases, particularly in its grocery aisles where McMillon said Walmart continues to gain market share. Walmart has had the largest grocery market share in Dallas-Fort Worth for years and has gained share since the pandemic started.
“We’re watching the most value-conscious shopper and how they’re behaving and what they need from us to put food on the table,” McMillon said.
Inflation has a negative impact “on too many families,” and he’s concerned about inflation rising higher and lingering.
Walmart has asked suppliers to avoid price increases and offered to place orders further out and to accept changes in packaging. With thousands of suppliers, the retailer has choices among competitors who can get creative, he said.
“We say, ‘here’s what we want to achieve, which one of you can help us?’ ” McMillon said.
While it’s less noticeable to the shopper, Boston-based consumer advocate group Consumer World says shrinking product sizes is another way to pass on higher prices. The group has been highlighting products from crackers and detergent that weigh less to toilet paper with fewer sheets per roll.
McMillon said he expects volatility in the supply chain to continue, but noted the out-of-stock issues of the pandemic were unique. The retailer’s 32% increase in inventories during the first quarter was largely due to restocking shelves to pre-pandemic levels. About a fifth of the inflated inventories were planning misses. Getting inventory right — the art and science of retailing — is hard enough in normal times.
The Dallas Federal Reserve Bank said 84% of Texas retailers surveyed in May continue to experience supply chain disruptions or delays. That’s down from a peak of 93% in November, but still high. About 58% of retailers said they expect it will take at least 10 months for the supply chain to return to normal.
Goods for the summer and fall quarter are already here, said John Furner, CEO of Walmart U.S. After posting a decline in profits, the retailer is working on lowering its costs but remains focused on increasing sales, he said, which grew 3% in the first quarter and 9% over the past two years. Walmart took some price cuts to move apparel inventory in the first quarter.
“This is a big economy and there are still a lot of healthy consumers out there,” Furner said. While Walmart tries to preserve its 60 years of everyday low prices, it’s trying to attract shoppers who will trade up on general merchandise. Clothing has had a major revamp with the addition of new brands Reebok and Justice and Walmart’s own brands, Free Assembly and Scoop, designed by Longview native Brandon Maxwell.
The retailer is making a big push to recruit customers to its $98-a-year Walmart Plus membership program that offers free delivery for online orders and other perks. It recently increased the gasoline discount for members to 10 cents a gallon, up from 5 cents, and expanded it to 14,000 ExxonMobil locations.
A year ago, Walmart hired Chris Cracchiolo, who previously led American Express’ membership rewards and loyalty benefits, to run Walmart Plus. Store employees were recently all just given free memberships.
“We want employees to experience the program and share with us ways to make it better,” Cracchiolo said.
Furner said there are indications that customers are also using Walmart Plus to save on gasoline by driving to a store less frequently and instead ordering online and having merchandise delivered.
With the exception of baby formula, Walmart has been able to restock its stores from the worst of the pandemic when shelves were chronically empty. McMillon sounded confident about being able to handle challenges ahead.
“We can manage the short term while we build for the long term and that’s what we’re going to do,” McMillon told analysts gathered for the company’s annual meeting.
An event on Friday included a Walmart tradition of bringing in thousands of employees to Arkansas for a celebration with headline entertainment. This year, Jon Batiste, James Corden and the Jonas Brothers performed in the Bud Walton Arena at the University of Arkansas. Walmart skipped the gathering the past two years because of the pandemic.
