Walmart executives projected during an investors call on Tuesday that food inflation will remain persistent for the foreseeable future.
Even as headline inflation statistics declined from 9.1% in June 2022 to 6.4% in January 2023, an increase in food prices has been especially salient for households attempting to make ends meet, according to recent data from the Bureau of Labor Statistics. Costs for food at home increased 11.3% between January 2022 and January 2023, while costs for food away from home rose 8.2% over the same period.
An analyst asked Walmart U.S. CEO John Furner and Walmart CEO Douglas McMillon during the grocery behemoth’s fourth-quarter earnings call whether the company expects food inflation trends to worsen or improve relative to other product categories. Furner remarked that food inflation “has been the most stubborn” driver of elevated price levels and noted that only “a little bit” has declined in the past several months. “We would have hoped and expected it to have come back more than it has going into this year,” he responded.
McMillon added that dry grocery items and consumables are the most “stubborn” and said that inflationary pressures in the categories would “be with us for a while.” He went on to say future nominal disinflation would nevertheless compound price increases from previous years.
“You’ll probably hear inflation numbers that start to sound lower, but you’ll have to remember that’s on a two-year stack,” McMillon continued. “So if inflation in dry grocery and consumables is only 3% or 5%, that’s on top of 15%. And that’s still a problem for the customer and still a pressure to their wallet.”
Inflation has progressively eroded purchasing power over the past two years, prompting some households to fund their consumption with savings and debt. Some 50% of respondents to a recent Gallup survey said they are financially worse off compared to one year ago, while 35% believe they are financially better off, constituting the most dismal results for the poll since the economy crashed in 2008 and 2009.
The most recent price level report from the Bureau of Labor Statistics occurred one week after President Joe Biden said that “inflation is coming down” during his second State of the Union address. “Inflation has been a global problem because of the pandemic that disrupted supply chains and Putin’s war that disrupted energy and food supplies,” he contended. “But we’re better positioned than any country on Earth.”
McMillon has previously said that Walmart is benefiting from households that had previously shopped at more expensive grocery stores. “Higher income families are shopping at Walmart because they’re so price sensitive right now,” he remarked last year. “Families making more than $100,000 in household income have driven a lot of our growth during this last quarter.”
McDonald’s CFO Ian Borden likewise announced last month that the fast food restaurant chain’s relatively less expensive offerings had drawn new business. “We can actually look at what is our share amongst low-income consumers; we’re gaining share right now among low-income consumers. And that goes back to the fact that we are positioned as the leading brand in terms of value for money and affordability,” he said during the company’s third-quarter earnings call. “To the degree that we end up in a more challenging economic environment in 2023, that’s going to be helpful to our business trends.”