Walmart is a daily stop for millions of shoppers who are looking to cash in on the retailer's low prices. But from supply chain issues to rising production costs, the company often faces challenges in keeping customers from having to break the bank when shopping. Now, the big-box retailer is sounding the alarm on a widespread issue that will affect shoppers everywhere—and it's not limited to Walmart. Read on to find out why the company is concerned.
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Inflation has had a major effect on retailers big and small.
ShutterstockConsumer inflation is bearing down on retailers, as it reached a 40-year high of 8.3 percent in April, according to Fox Business. As a result, Walmart was among a number of retailers last week who reported significant decreases in profits for their first quarters. The company saw shares decrease by 11 percent on May 17, making it the retailer's worst day in 35 years, Fox Business said. Walmart's shares fell again on May 18, down another 7 percent. Edward Maya, a senior markets analysts for Oanda, said that "the strength of the consumer will be tested" as Walmart's report indicates that "rising pressures are not easing."
Walmart says shopper habits are changing based on rising costs.
ShutterstockInflation is widespread, but Walmart is most concerned about the impact on food, issuing an alarming warning for customers everywhere. "On the food side, we're seeing double-digit inflation and I'm concerned that that inflation may continue to increase," Walmart CEO Doug McMillon said, per Fox Business.
John Furner, the chief executive of Walmart U.S., said the company is seeing rising inflation change customer trends in categories like "deli, lunch meat, bacon [and] dairy," with shoppers now trading down in these "essential" food categories. "In proteins and dairy, we see some switching from brands to private brands. And we see switching from gallons of milk to half gallons of milk," McMillon said.
Milk prices have climbed significantly.
iStockIn terms of rising food prices, the dairy sector is being hit the hardest. According to the Bureau of Labor Statistics, the average price of a gallon of milk in the U.S. is now more than $4—the highest it's ever been, and up from $3.45 last April and $3.27 in April 2020. Data from the U.S. Department of Agriculture (USDA) shows that in some cities—like Kansas City, Missouri; Philadelphia, Pennsylvania; and Pittsburgh, Pennsylvania—the average price of milk is already over $5 per gallon, per Newsweek.
According to the news outlet, the increase in milk prices is a combination of supply chain problems from the pandemic, higher costs for farmers in terms of feeding and transportation, and a decrease in the number of cows and farms. The USDA data showed that the number of milk cows on farms in the U.S. is now 9.4 million, which is 98,000 fewer cows than in April 2021.
Walmart says it is working to lower prices.
ShutterstockWalmart knows low prices are important to its customers. "We need to do more to keep costs low, and where we see the switching from brands to private brands, we’ll continue to watch that for a group of customers, but we’ve got to all work harder to keep prices low for the American consumer," Furner said.
Specifically, Walmart wants "customers to have lower prices" even as food inflation continues to rise, according to McMillon. "Not all of [our] customers can afford to absorb this," he said. "That's where they need our help."
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