Walmart: ‘We’re out there asking suppliers even now, do any of you want to … take prices down while prices are going up to gain market share’

The retailer reported yesterday that grocery sales grew 9.2% or $3.6bn, reflecting strong market share gains – according to Nielsen – and low-to-mid single digit ticket inflation during its third quarter, and increased by a 15.6% on a two-year stacked basis.

“We’re pleased with the strong momentum in the grocery business as a strong price positioning and omni offerings resonate with consumers,”​ Walmart executive vice president and CFO Brett Biggs told analysts Nov. 16, adding this is “the strongest quarterly growth in six quarters.”​

Sales gains during the quarter are not unique to Walmart – in fact many brands and other retailers have reported the same, but often in those cases the boost came in part from higher prices due to inflation. Walmart, on the other hand, is watching unit growth in grocery in the US grow faster than dollars – a position that CEO of Walmart US John Furner says is “a position we’d like to stay in as long as we possibly can.”​

He explained: “We want to keep prices low for customers all across the business and we’ll be the last to go up. So, we’re happy with our pricing positioning. We see gaps that are wider now than they were before the pandemic began and we intend to maintain that position.”​

Walmart seeks suppliers willing to rollback prices for market share gains​

To maintain and even expand market share gains, Furner added that Walmart continues to look for ways to rollback prices.

“We’re out there asking suppliers even now, do any of you want to get aggressive and swim upstream and take prices down while prices are going up to gain market share. And we got so many suppliers to work with and choose from that you find people and some categories that can do things and as the months progress, we expect to find more of them,”​ he said.

‘We’ve got lots of flexibility as we monitor price gaps’​

Walmart is not placing the full onus of keeping prices down on its supply partners. It is also using its size and diverse product mix across the store to manage prices as the cost of goods, including shipping, increases. It is also drawing on lessons learned from previous high inflationary periods.

“We haven’t seen this kind of inflation in the US for quite some time, but we have operated in markets where we’ve seen this basically forever and even more extreme. So, that experience is helpful,”​ Walmart President and CEO Doug McMillon said.

Emphasizing that the purpose of Walmart is “to save people money and help them live a better life,” McMillon explained that the retailer “we’ve got lots of flexibility as we monitor price gaps to decide what we do at general merchandise, what we do with apparel, for example, what we do with beef, with the inflation that is happening there. And it becomes a mix management exercise with us trying to mange serving the customer member well, managing the bottom line.”​

Furner added that Walmart also has an advantage over other businesses struggling with supply chain constraints because two-thirds of its products are sourced from the US – reducing the transportation strain.

Walmart also took steps earlier in the year to get ahead of congestion and supply chain pressures for the holiday season so that it could keep prices down, including chartering vessels, ensuring appropriate forecasting and managing labor across the supply chain, Furner said. Combined, these strategies have helped the company build inventory more than 11% and go into the holiday season prepared to meet consumers’ needs with out suffering higher costs.

With an optimistic view of the holiday season, and a strong Q3 behind it, Walmart raised its full-year guidance for an adjusted earnings per share of $6.40 versus prior guidance of $6.20-$6.35. It also raised its fiscal 2022 US same-store sales growth outlook to above 6% from 5% to 6%.