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Walmart CEO gives update on prices as retail bellwether announces surge in sales
Walmart's earnings have helped ease fears of a recession - as the retail bellwether saw its like-for-like sales jump almost 4 per cent for the first three months of the year.
The strong performance by the nation's largest retailer could assuage some investors' fears about ebbing US consumer spending.
But CEO Doug McMillon also spoke about prices at its 4,600 stores - and what shoppers can expect.
'General merchandise costs are now lower than a year ago, which is great, but they're still higher than two years ago on like items' he explained.
The retailer, he added, continues to see 'high single-digit to low double-digit cost inflation' on so-called 'dry grocery and consumables' like paper, towels, sugar, coffee, flour and cereals.
Walmart's revenue rose 6 percent to $161.51 billion in the first quarter of the year
'We all need those prices to come down,' he added. 'The persistently high rates of inflation in these categories lasting for such a long period of time are weighing on some of the families we serve.'
McMillon and other execs were eager to say that Walmart has a 'price gap' over rivals - meaning it charges less.
'Price is really important to the Walmart shopper,' said John Furner, the president and CEO of the US stores.
'We are pleased with the price gaps that we see in the market' he told analysts.
He also said the chain is selling more and more of its own-label groceries as shoppers look to save money and cut back on brands like Coca-Cola.
On the chain's famous 'rollback' prices, Furner said: 'We've been able to keep a number of items on either rollback program or base prices where customers can buy key important holiday meals at the same price that they bought them for the year before.'
However, he warned that it is 'not easy to predict' whether they can keep those seasonal rollback prices later in the year due to the inflation in dry grocery items.
The two were speaking to investors as Walmart released its earning for the first quarter of 2024.
The company beat its earnings and revenue expectations for the first quarter of the year as the price gap between cooking at home and dining out continues to widen and the chain continued to draw in higher income shoppers.
The strong performance by the nation's largest retailer, with revenue up 6 percent to $161.51 billion compared to $152.30 billion in the same period last year.
The retail giant now expects sales for the whole of 2024 to be at the high end or slightly above its prior forecast of 3 percent to 4 percent growth.
'Most Americans remain uncomfortable with food prices and are still actively looking for ways to keep their spending in check,' Neil Saunders, an analyst at GlobalData Retail, said in a note to clients on Thursday.
This has worked in 'Walmart's favor and has allowed the chain to continue to acquire new customers.'
Chief financial officer John David Rainey told CNBC customers were opting to buy more groceries from the store as the cost of eating at restaurants continues to rise.
The retailer is also attracting more high income shoppers attracted by the convenience of the stores, Rainey said.
'Upper income households continue to account for the majority of gains' Rainey told analysts on Thursday's earnings call.
'More customers are shopping with us, more often' he explained.
The company's shares rose around 6 percent in early trading on the news
For the first time Walmart's delivery business delivered more sales in terms of volume than in-store pickup.
'We've got customers that are coming to us more frequently than they have before and newer customers that we haven't traditionally had, and they're coming into a Walmart whether it's a virtual store online, or whether it's one of our physical stores,' Rainey told CNBC.
The retailer also triumphed in e-commerce sales which rose 22 percent year on year driven by increased in-store pickup and online delivery orders.
The earnings results mean the retailer expects to reach the top end or even beat its full-year guidance.
The company's shares rose around 6 percent on the news - at one point hitting a record high of $64.22.
Walmart also drove profits with its global advertising business where business grew 24 percent in the first quarter.