Walmart says prices will fall — except in one major area

The prices of many food items and other goods have fallen by Walmartaccording to CEO Doug McMillon.

However, the head of the nation’s largest retailer said Thursday that inflation has been “more stubborn” in one part of the store: the aisles that carry dry goods and processed foods. Those items include soft drinks.

In a phone call after the company reported second-quarter earnings, he said Walmart had pressured suppliers who stock its shelves to lower prices, but he urged those companies to do more.

“We have less upward pressure, but there are some who are still talking about cost increases, and we are resisting that strongly because we believe that prices need to come down,” he said.

Walmart CFO John David Rainey told CNBC that the company’s overall inflation rate remained flat during the quarter, and that revenue growth came from selling more units, not charging higher prices.. But price dynamics were not consistent across products: Prices continued to rise for dairy, eggs, sugar and meat, and were stable or down for some commodities including pet food, apples, potatoes, strawberries, sporting goods and garden tools.

Walmart’s quarterly results sparked a rally in other retail stocks, including goal, Best Buy and Maisie Thursday. The big retailer’s results and better-than-expected retail sales figures defied concerns about slowing consumption.

Walmart beat on both full-year and final results and raised its outlook to reflect a stronger first half. Consumers continued to be “choosy and discerning,” Rainey told CNBC. [and] “It’s about value,” but company leaders “don’t see any additional harm to consumer health.”

All consumer brands, including Walmart, have come under increasing scrutiny from shoppers and even politicians as frustration with more expensive goods continues — and McMillon’s comments about Walmart’s suppliers underscore just how much pressure grocery stores have faced. TikTok has been criticized for introducing electronic price tags on store shelves, with some users claiming the company would use the technology to raise prices when demand spikes. (Walmart, for its part, has said it has no plans to change its pricing approach and added the new price tags to save store workers time.)

Many brands have made a big effort to emphasize value or offer new deals, especially as consumers become more selective about where they spend their money.

McDonald’sFor example, Target launched its $5 meal deal in late June and decided to extend the offer in most markets. In late May, it said This will reduce the prices of about 5,000 items that are frequently purchased throughout the summer, such as peanut butter, milk and meat.

Walmart is also touting discounts. The company said it conducted 7,200 “reversals,” its term for short-term deals, across various categories in the quarter that ended July 31. That number included a 35% year-over-year increase in the number of reversals on food deals.

While Walmart’s profits are growing faster than sales, McMillon said that’s due to growth outside of retail in higher-margin businesses like advertising — not higher commodity prices.

“We’re not raising prices, we’re lowering them,” McMillon said. “We don’t want to see higher margins on products. When we talk about improving margins in our company, we’re talking about business mix.”