Walmart says some suppliers are working with the retailer to cut prices

The logo of a Walmart supermarket is seen in Rosemead, California, U.S., June 11, 2020. REUTERS/Mario Anzuoni/File Photo

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BENTONVILLE, Ark., June 3 (Reuters) – Senior Walmart Inc executives said on Friday that some suppliers reacted to efforts by the largest U.S. retailer to cut prices despite their own struggles with high inflation, material costs and manpower.

Investors have questioned Walmart’s ability to ask suppliers to offer price cuts as they too focus on protecting margins from inflation that hovers at its highest level in four decades. Read more

“Some vendors have taken a line, others are working with us to find ways to cut costs even in a time of rising costs,” Walmart US CEO John Furner said in response to an analyst question. at the Arkansas-based company’s annual meeting.

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“A number of suppliers” are working with Walmart to ensure prices don’t increase and, in some cases, are also finding ways to lower them, Furner added.

“I’m really impressed,” Furner said.

Walmart CEO Doug McMillon said the company is using methods such as ordering further away or requesting changes to package sizes or case sizes to make it easier for suppliers to control their costs.

“In my 30 years of experience, mostly in merchandising, there’s always been something you can do, there’s always been a way to cut costs to take the pressure off,” McMillon said during the meeting.

McMillon also said he was “concerned” about the rate of inflation rising, either to that level or if it rises further and stays there for an extended period.

“I think it’s negatively impacting too many families, and that worries me,” McMillon said.

To mitigate the impact on households and better compete with dollar chains, McMillon said Walmart would focus on limiting price increases on staples such as canned tuna and mac and cheese.

To ensure volumes on discretionary items are maintained, he also plans to cut prices on apparel and homewares to attract inflation-pressed shoppers as well as those with higher incomes, McMillon added.

In addition to price increases, Walmart is facing increased inventory caused in part by a shift in shopping habits toward food and other staples. Inventories rose 32% in the first quarter, a fifth of which came from goods that arrived earlier than expected.

Furner said the “right” inventory was going to be key to its success after contributing to a quarterly decline in first-quarter earnings. It will take a few more quarters, however, “to get back to where we want to be,” Furner said.

The comments came a day after Walmart announced it would open four new US fulfillment centers over the next two years, doubling its storage capacity and speeding up its ability to deliver orders.

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Reporting by Siddharth Cavale in Bentonville, Arkansas; Editing by Clarence Fernandez and Will Dunham

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