Walmart says prices are falling — except in one key area

The prices of many food and other items have decreased. 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 groceries and processed foods. Those include items like soda.

In a phone call after the discounter 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 still people talking about cost increases, and we are resisting that very strongly because we believe prices need to come down,” he said.

Walmart’s overall inflation was flat during the quarter, and revenue growth came from selling more units, not charging higher prices, Chief Financial Officer John David Rainey told CNBC.. But price dynamics were not consistent across products: Prices for dairy, eggs, sugar and meat continued to rise, and were flat or down for 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 Messi Thursday. Big discounter earnings and better-than-expected retail sales figures defied fears of a consumer slowdown.

Walmart beat its bottom line and raised its outlook to reflect a stronger first half of the year. Consumers continued to “choose and excel,” Rainey told CNBC. [and] “The search for value,” but company leaders “do not see any further deterioration in consumer health.”

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

McDonald’sFor example, it launched its $5 meal deal in late June and has decided to extend the offer in most markets. Target said in late May It would lower prices on about 5,000 frequently shopped products throughout the summer, such as peanut butter, milk and meat.

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

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 prices,” McMillon said. “We don’t want to see margins go up. And when we talk about margin improvement in our company, it’s a mix of businesses.”