IMPORTANT POINTS:
- Walmart CEO Doug McMillon anticipates a possible period of deflation in the US in the coming months.
- Despite price increases over the past year, McMillon sees a slowdown in these increases, suggesting a possible decline in prices, especially in dry goods and consumables.
- This change in price trends could redirect consumer spending toward general merchandise, benefiting Walmart in terms of profitability.
Walmart CEO Doug McMillon mentioned the possibility of facing a period of deflation in the United States in the coming months. This statement was made in a conference with analysts, where McMillon said: “In the US, we could be managing a period of deflation in the coming months.”
Although prices for Walmart products in the U.S. remain higher than last year, with a marked increase over a two-year period, McMillon highlighted a slowdown in these increases. He even suggests that there could be a reversal in this trend, leading to deflation, or declining prices, especially in dry goods and consumables.
Impact of Deflation on the Consumer
The potential deflation in basic goods could allow consumers to allocate more of their budget to the purchase of general merchandise. According to McMillon, this would be beneficial for Walmart, as these products typically generate higher profits.
Inflation and Interest Rates: A Change in Direction
These observations from McMillon highlight the slowdown in inflation in the US after the Federal Reserve raised interest rates. This change is significant compared to the high inflation that affected consumers after the pandemic.
Challenges and Opportunities for Walmart
Now, McMillon faces the challenge of convincing Wall Street that Walmart can continue to boost its sales and increase its market share, even as inflation declines. Additionally, he raises the question of whether Walmart will retain the higher-income customers who gravitated toward the chain during the inflationary spike.
Finally, Neil Saunders, analyst at GlobalData, commented that the situation is not turning out as expected. Despite financial pressure, Americans are looking to maximize the value of their money, and Walmart remains a preferred choice for many.
