© Reuters. FILE PHOTO: The logo of a Walmart Superstore is seen in Rosemead, California, USA, June 11, 2020. REUTERS / Mario Anzuoni / File Photo
By Siddharth Cavale
BENTONVILLE, Ark. (Reuters) -Senior Walmart (NYSE 🙂 Inc. executives said Friday that some vendors have responded to the largest U.S. retailer’s efforts to lower prices despite their own struggles with high inflation, material and labor costs.
Investors have questioned Walmart’s ability to ask suppliers to offer price reductions when they are also focused on protecting margins in light of inflation hovering at four decades’ highs.
“There are some vendors who have taken a line, others who are working with us to find ways to reduce costs even in times of rising costs,” said John Furner, CEO of Walmart US, in response to a analyst questions at Arkansas-based company annual meeting.
“A number of vendors” are working with Walmart to ensure prices do not rise, and in some cases even to find ways to lower them, Furner added.
“I’m really impressed,” Furner said.
Walmart CEO Doug McMillon said the company uses methods such as ordering out longer or asking for changes in package sizes or box sizes to make it easier for suppliers to control their costs.
“In my 30 years of experience, most of it in the field of merchandising, there has always been something you can do, there has always been a way to get the cost out to ease the pressure,” McMillon said at the meeting.
McMillon also said he was “concerned” about rising inflation, whether it is at this level or if it is rising further and staying there for an extended period of time.
“I think it’s having a negative impact on too many families, and I’m worried about that,” McMillon said.
To mitigate the impact on households and better compete against dollar chains, McMillon said Walmart will focus on limiting price increases on staples such as canned tuna and macaroni and cheese.
To ensure that volume is maintained on discretionary goods, it also plans to reduce the prices of clothing and home goods to attract shoppers pressured by inflation, as well as those on a higher income scale, McMillon added.
In addition to price increases, Walmart is dealing with an increase in inventories, caused in part by a shift in purchasing patterns toward food and other basic things. Inventories rose 32% in the first quarter, one-fifth of which came from goods arriving earlier than expected.
Furner said getting the statement “right” would be key to its success after contributing to a quarterly drop in first-quarter profits. However, it will take a few more blocks “to get back to where we want to be,” Furner said.
The comments were made a day after Walmart announced it would open four new fulfillment centers in the United States over the next two years, doubling its storage capacity and speeding up its ability to deliver orders.