Prices Down, Walmart Up

The company is positioned for it all. "We don't really care."

After nearly four years of semi-hyperinflation, prices have finally started their downward trend across grocery and general merchandise. Walmart looks poised to capitalize. “The great thing about our position is we don't really care," CEO Doug McMillion remarked when asked by analysts about consumer spending habits. "They can buy whatever they want to buy. We're positioned for food. We're positioned with fresh. We're positioned with apparel and with hardlines and with the holiday season with categories like toys." 

Walmart's success is in stark contrast to Target, largely due to the Arkansas-based company's operational excellence. Last quarter, Walmart saw its consolidated revenues surge to $160.8 billion, marking a 5.2% increase, with U.S. store revenue rising by 4.9% to $109 billion. The eCommerce sector, bolstering these figures, jumped by 24%, driven by strong pickup and delivery services. Flexing their digital muscles, Walmart Connects advertising sales jumped 26%. 

According to executives, lower prices are notable in the commodity grocery segment. Walmart has observed price decreases in essentials such as dairy, eggs, chicken, and seafood.

Even more striking is the shift in the dry grocery and consumables categories, traditionally more resistant to price drops. The company reports a low to mid-single-digit decrease in general merchandise prices compared to the previous year. Roll-backs are up 50% since last year.

In an era where global economic trends lean towards deflation, Walmart's executive team isn’t too wary. With deflation, consumer prices get lower while operating expenses stay the same--leading to tighter profit margins for corporations. "Are we ready for that?" McMillion asked. And the answer is, well, yeah. You’re Walmart. The company has made technology investments the lynchpin of its overall strategy. "It's too early to call how dramatic it will be. And as we mentioned earlier, we are happy about it."

Technology and Supply Chain Investments are paying off. 

• Walmart opened its third large eCommerce fulfillment center, which will double its storage and daily order capacity and enable faster shipping to almost 90% of the U.S.

• Local Sam's Clubs now ship and pick 60% of online Sam's sales.

• Walmart is set to have seven stores with advanced automated fulfillment centers by the end of the month.

They are slowly dominating e-commerce.

• Since last year, Walmart's Marketplace has more than doubled the number of items available in the U.S.. 

• The company revamped fulfillment metrics around 'perfect order,' improved customer satisfaction, and increased market share.

They Said It:

CEO Doug McMillion of deflation

On the GM side, as things have come down, it's come down kind of steep in the last few weeks, maybe relative to what we've seen before. And so I think it's to be seen. If the food prices come down in dry grocery and consumables and we start seeing deflation in those categories, that will free up dollars to be spent in general merchandise. And with the rollback positioning and some of the prices we're hitting, it makes sense that people would be able to shift back to GM as they shop the box or the app…

But if they've got dollars to spend, they'll spend them. And we're there for them. And we can do it in store club, we can do it with pickup, we can do it with delivery. So we feel good about our position, and we'll just manage it as the weeks and months play out and are as fascinated to watch it as you are.