Walmart CFO John Rainey stated Wednesday that the company was working to reduce food prices in order to relieve pressure on consumer’s wallets and allow them to spend more money on other products.
Rainey, speaking to analysts during a Thursday earnings call, said: “We’re working hard to reduce grocery prices as we enter the holiday shopping season to ease the burden on customers and give them more capacity for general goods.”
Walmart believes that by lowering food prices, customers will be more able to spend their money on general merchandise, which is a category that not only makes a great gift but also has higher margins.
General merchandise sales fell in the third quarter compared to the same period last year. The company did say that they were able to gain market share in all categories, as the costs of general merchandise dropped by low to mid-single digits from last year.
Doug McMillon, CEO of the company, noted that the food category continues to be a source of concern and that the product costs are higher than last year.
McMillon stated that “they are still up on the two-year stack and this is adding pressure to our customers.”
He said that although beef prices were high, the company was seeing a reduction in dairy, egg, chicken, and seafood.
In the October Consumer Price Index, frozen beef steaks, for example, were up 10.6%.
McMillon said that “the pockets of disinflation” we see are helpful, but we would like to see them grow faster, particularly in the categories of dry groceries and consumables.
Rainey, the company’s CEO, said that it was not immune from economic conditions. Customers are “showing continued discretion to manage their household budgets.”
He stated that due to the high cost of essential items, the company experienced “a higher degree of variability in performance between holiday events in America, including seeing a softening in October’s second half that was out of trend with the rest of the third quarter.”
Walmart’s shares are up 10%, lagging behind the S&P 500 which is up 17%.
The retailer raised its sales and profit estimates for the fourth quarter on Thursday.
The Arkansas-based firm now expects earnings per share in fiscal 2024 to range between $6.40 to $6.48. This is up from $6.36 – $6.46. The company expects that sales in stores that have been open for at least one year will increase between 5% to 5.5%. This is up from the previously estimated range of 4% to 4.5%.