Walmart is stocked and ready to roll back prices for Christmas

Discussion
Photo: Getty Images/Sundry Photography
Nov 17, 2021

Color Walmart CEO Doug McMillon impressed with his company’s performance after reporting third quarter sales that exceeded both the retailing giant’s expectations as well as those of Wall Street.

Walmart’s core business in the U.S. posted a 9.2 percent year-over-year gain in same-store sales. The retailer’s comps were up 15.2 percent on a two-year basis. Grocery was a key driver for Walmart during the period with sales up nearly 10 percent, the strongest quarterly growth for the company in six quarters.

Mr. McMillon called the results for Walmart US “remarkable” yesterday on the company’s third quarter earnings call before listing the ways the retailer is seeking to build its overall business.

“Transaction counts in our stores and clubs are growing, inventory is up 11.5 percent, our price gaps are where we want them, and we’re innovating in the supply chain and adding capacity,” he said. “And we’re building businesses like Walmart Go Local, Walmart Connect, Walmart Luminate, Walmart+, Spark delivery, our Marketplace and Walmart Fulfillment Services. Financial services is another area where we know we can make a difference in the lives of so many. We recently launched bill payment services in our stores as well as the ability to load money to a bank account or a prepaid card.”

Mr. McMillon addressed gross profit margin concerns after a quarter when Walmart was down 42 basis points from last year.

“We’re seeing inflationary cost pressures in some areas, and our merchants remain laser focused on taking the necessary steps to mitigate supply chain congestion while working with suppliers in monitoring price gaps to manage margins appropriately. Lower markdowns and increased contributions from advertising revenue have helped offset cost pressures,” he said.

Walmart’s CEO said that the company, buoyed by its strong inventory position, would continue to hammer price as a key differentiating factor during the holiday season and beyond despite inflationary pressures.

John Furner, president and CEO of Walmart US, echoed those comments. He said that the company is always approaching suppliers about opportunities for price rollbacks to gain market share. Walmart has found opportunistic suppliers who are on board with that approach and the company expects to find more in the coming months.

DISCUSSION QUESTIONS: Does Walmart’s core strengths plus the diversification of its business into other areas (ads, fulfillment services, et al) give it the hedge it needs to be more aggressive on price during the holiday season? How aggressive do you expect Walmart to be and how will that affect its retailing rivals?

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"Walmart has huge advantages in terms of scale and scope and I assume it will be as aggressive as possible as soon as possible this holiday season."

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19 Comments on "Walmart is stocked and ready to roll back prices for Christmas"


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Mark Ryski
BrainTrust

Yes, Walmart has a big advantage – but it will be a battle with Target. The holiday season is a continuation of the general “Haves vs. Have-nots” storyline we have been tracking throughout the pandemic. The largest retailers can brute-force their way through the supply chain issues, and have the capital to hold inventory, and even maintain low prices. Many if not most other retailers can’t do that. In fact, Target just announced that they will not be passing all costs along to consumers. Clearly Walmart and Target understand that low pricing will be an important competitive advantage throughout the holiday selling season.

Richard Hernandez
BrainTrust

In my area Walmart has backed off being the low price leader, but there are still a lot of customers in their stores, so people are necessarily looking at price as a driver here. More so they are asking, do you have what I need (due to supply constraints) and is it within my budget, as most retailers have had to take it on the chin with cost increases.

Neil Saunders
BrainTrust

When it comes to inflation, the biggest advantage for Walmart comes from its economies of scale. However the additional revenue streams are also very helpful in offsetting margin erosion from inflation. Whatever happens, it is vital that Walmart retains its reputation for low-prices, especially as others such as dollar stores and deep-discounters snap at its heels. That reputation is partly what has allowed Walmart to grow sales over the past quarter: as prices rise, more Americans turn to Walmart to make their budgets stretch further.

Doug Garnett
BrainTrust

With booming sales, it’s not clear to me why Walmart should seek to be aggressive on price. Certainly customers will appreciate Walmart holding back increases responding to inflationary pressure (especially since it’s hard to tell what part of that pressure is real, what part opportunist, and what part quite short term).

Zel Bianco
BrainTrust

As I commented the other day, don’t bet against Walmart.

Given their strategic work on fixing their supply chain, it will provide a big advantage over their competitors. It will most certainly provide coverage to their diversified portfolio of ways to service their shoppers and perhaps bring in new shoppers to the Walmart family.

Liza Amlani
BrainTrust

Walmart is a powerhouse and can handle promotions over Christmas and there is doubt we will see a few roll backs this season.

They don’t have the inventory challenges other retailers are experiencing and supply chain disruption is impacting the big players but it’s not as detrimental to their bottom line. They own ships, have a monopoly over the ports, and have the power to shift production when they need to.

Assortments are looking more competitive and they offer workers better pay and training so they have the manpower to compete.

Of course Walmart’s results are “remarkable.” They are set up for success.

Andrew Blatherwick
BrainTrust

Following last week’s article that Instacart is going to start promotions and price cutting, we see that Walmart — who are already significantly lower priced — is focused on even better pricing to build market share, and they have the inventory to deliver! When you have the strongest buying power in the world, you are likely to be able to deliver on both counts. They will certainly get the best trading terms from suppliers and if they want to maintain their volumes, suppliers are likely to also give them priority on deliveries too.

In inflationary times the strong often get stronger. At the other end you will get lots of startups as well but they have to rely on differentiators other than competing on price and availability.

Gary Sankary
BrainTrust

Walmart has always understood that success in retail, especially their class of trade, starts and ends with the supply chain. They are experts at planning inventory, and have done a great job anticipating issues from raw materials to store fulfillment. One of my favorite examples: they were one of the first retailers to leverage commodity futures when sourcing raw materials in the apparel market. By going vertical with their private label productions they were able to avoid being impacted (much) by fluctuations in cotton prices back in the day.

I would fully expect Walmart to be as aggressive about their prices this holiday. Consumers have been told everything is going to be far more expensive and that they won’t be able to find any toys or turkeys this year. Walmart is well positioned to step in as a reliable, credible source for goods consumers want. And low prices will drive marketshare and continue to feed their remarkable performance.

Nicola Kinsella
Guest

Walmart drives a hard bargain with suppliers. As a result, they can offer lower prices. And with both the cost of goods and transportation putting pressure on competitors, and the cost of living rising, now is the time – in a troubled market – to invest in grabbing market share. To that end, I expect Walmart will continue to be aggressive on price over the next six months.

I don’t see diversification as being the driver behind, nor enabler of, their low price strategy. Walmart has always innovated. Its new offerings are no exception, and the extra services provide Walmart with more opportunities to drive brand engagement and loyalty. While they will also create new revenue streams, I believe Walmart is more likely to expect each to stand alone than have one subsidize the other at this stage.

Joe Skorupa
BrainTrust

You are absolutely right about Walmart being famous (sometimes called notorious) for driving their suppliers hard, but guess what? It turns out suppliers were the ones that got caught flat-footed when consumer demand exceeded expectations. Certainly there are problems at shipping ports and shortages of truck drivers, but the main problem is that suppliers did not (maybe cannot) ramp up quickly enough to meet demand. Walmart is an expert at predicting demand (as well as an expert in supply chain management) and pushes suppliers to meet their demands or they will go somewhere else. This is a threat no supplier wants to hear. So it is not surprising that as many other retailers are short on inventory Walmart is flush.

Lisa Goller
BrainTrust

Yes, Walmart has been busy strengthening its competitive position to protect its everyday low price leadership. As inflation rises, Walmart is well positioned to welcome value shoppers.

Walmart’s strengths include negotiating power, pervasive stores, powerful partnerships and its reputation as a place to save money. Now that product availability is under control, Walmart can be aggressive in its marketing — without the need to resort to deep discounts.

Rivals that lack reliable inventory are surely panicking about how they’ll compete this holiday season.

Jennifer Bartashus
BrainTrust

Scale will dictate winners this holiday season. Walmart, Target, Costco and other big box retailers have an advantage in that they have been able to leverage their scale to build up inventory levels heading into the holiday season as well as to keep prices competitive. The diversity of product mix in stores also helps to mitigate any shortages in some categories by running promotions to guide shoppers to other products. If you add on anticipated shipping delays for online orders, and the fact that Walmart, Target and others have options for same-day delivery, curbside or in-store pickup, they seem well positioned this holiday.

Dick Seesel
BrainTrust

It’s in Walmart’s long-term interest to maintain its value positioning. (Amazon in particular is in the same position.) The company’s longtime commitment to supply chain management is really paying off this year, too. The year-end margins may not be up to snuff — given the higher costs of goods along with the higher costs of stocking the shelves — but Walmart can absorb these short-term hits in the interest of gaining market share.

Ryan Mathews
BrainTrust

Walmart has huge advantages in terms of scale and scope and I assume it will be as aggressive as possible as soon as possible this holiday season. Its rivals will, no doubt, try to play catch-up, but it isn’t an effective strategy.

Gene Detroyer
BrainTrust

When we talk pricing, we automatically think of lowering price and reduced margins. That is not the philosophy at Walmart. Walmart pricing is based on efficiencies throughout the organization. They look to maintain margins.

Walmart had a hiccup about a decade or so ago, when they forgot about Sam’s philosophy, but since they returned to his type of thinking they have soared.

To the question, I don’t think Walmart will have aggressive pricing, they will just have Walmart pricing which will be better than anyone else.

Paula Rosenblum
BrainTrust

Let’s not forget they leased their own container ship (along with Target and a couple of others) so they will be well positioned in-stock. Keeping prices sharp will just drive another nail into other retailers’ coffins.

I wonder why Amazon didn’t lease a container ship — maybe it’ll fly everything here via its fleet of jets (snort).

Jeff Sward
BrainTrust

It would be fascinating to see a comparison of EOM October inventory positions across a range of the big box retailers for the details of 2021 vs 2020 vs 2019. Looks like Walmart is in the enviable position of having both the value proposition and the inventory to deliver the sales result. I have not looked at Target’s inventory numbers, but the many empty shelves look problematic.

Shep Hyken
BrainTrust

If any retailer has the ability to offer lower pricing, it’s the company known for lower pricing: Walmart. They have the scale to offer lower prices, with lower margins, that will woo customers to their stores and website. The competition is Amazon, Target and a few other major retailers. Their strategy continues to be what they have always done, get customers in their stores to experience low price and large selection. How aggressive do we expect Walmart to be? The same as always! (VERY AGGRESSIVE!)

Anil Patel
BrainTrust
Walmart has shown significant growth and has established itself as a platform. They have complete control over their supply chain as well as their customers’ purchasing patterns. They have a large amount of customer data, which allows them to easily analyze their customers’ shopping habits and trends, which other retailers do not have. Walmart would analyze and leverage this information, and as a result, they may roll back prices on selected items but in a well-planned manner, maintaining their margins. Even if Walmart does not do so, other retailers may, out of fear, aggressively reduce the prices of their products, and that too in a random manner. In response, Walmart may drop prices of some items, but only with prudent planning and analysis. Secondly, retailers like Walmart and Target are setting benchmarks for other retailers. They have evolved into a platform, proven themselves, and demonstrated to the world that by utilizing technology suitably, a retailer can satisfy their customers, remain profitable, and grow. Walmart has been disrupting the supply chain since its inception, and this… Read more »
wpDiscuz
Braintrust
"Walmart has huge advantages in terms of scale and scope and I assume it will be as aggressive as possible as soon as possible this holiday season."

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