Executives from Walmart say the increasing pressure of inflation may be driving consumers to purchase more store brands.
While on a call with investors announcing the company’s first-quarter earnings, Walmart’s President and CEO Doug McMillon discussed the challenge that inflation poses.
“While we’ve experienced high levels of inflation in our international markets over the years, U.S. inflation being this high and moving so quickly, both in food and general merchandise is unusual,” McMillon said. “We’ll control what we can control, reduce our inventory level, and keep prices as low as we can, especially on opening price point food items, while improving our profit performance.”
Still, while inflation may be posing challenges, McMillon explained Walmart is better positioned than smaller companies to keep prices low, appealing to low-income consumers.
“Not all of them can afford to absorb this — that’s where they need our help,” McMillon said, adding that the company is focusing on the essential categories where it can keep prices low for those who are struggling to purchase food.
Brett Biggs, Walmart’s Executive Vice President, and Chief Financial Officer, pointed out consumer concerns about high inflation are resulting in shoppers turning to store brands. “Consumers are feeling inflation pressures as evidenced by an increase in grocery private-label penetration,” said Biggs.
John Furner, chief executive of Walmart U.S., agreed, saying the move to private labels is happening in categories like “deli, lunch meat, bacon and dairy.”
“We need to do more to keep costs low, and where we see the switching from brands to private brands, we’ll continue to watch that for a group of customers,” Furner said on the investors call.
When it came to food and supply chain costs, Biggs added that Walmart plans to “partner with suppliers on the food and consumables side this spring to try and bring those costs down.”