Walmart CEO Doug McMillon's remarks at the 2024 Morgan Stanley Global Consumer and Retail Conference provide valuable insights into the current state of food inflation and the retailer's performance. With food prices showing signs of resurgence and consumers proving more resilient than expected, Walmart is navigating these challenges with strategic initiatives.

Walmart's Resilience in the Face of Food Inflation

Food Inflation and Its Drivers

Walmart CEO Doug McMillon has observed that food inflation is on the rise as we approach 2025. This is primarily driven by eggs and dairy, but other factors such as cocoa and other inputs are also putting pressure on prices. Despite efforts by suppliers to drive volume, food prices have not yet returned to pre-pandemic levels. For example, in October, food inflation accelerated slightly, with prices rising 1.8% year over year across all food and beverages. The average price for a dozen eggs in October was about $3.37, which is still 63% higher compared to last year. An avian flu outbreak has been a major contributor to the increase in egg prices, with more than 6 million birds being slaughtered in November alone. This has led to a decrease in the overall flock by about 3% over the past year. Dairy prices also saw a slight increase during the same period.

Walmart's Response and Performance

Walmart has been taking steps to address the issue of food inflation. Suppliers are stepping up to help drive volume, and McMillon anticipates that egg and milk prices will adjust faster than dry grocery prices. In fact, he projects that processed food prices may not decrease at all next year. Despite the challenges, Walmart has managed to exceed earnings and revenue expectations in the third quarter. With its strongest food unit volume growth in four years, the Bentonville, Ark.-based retailer has rolled back prices on over 7,000 items across various categories, attracting shoppers from both high and low income brackets. According to the latest data from Numerator, Walmart now leads all retailers in CPG spend, commanding 21.2% of the market share.

Supply Chain and E-commerce Initiatives

Walmart's focus on supply chain automation has played a significant role in its success over the past year. Throughout 2024, the retailer has been upgrading and automating its distribution and fulfillment centers. This has helped improve efficiency and pricing, as McMillon stated, "We like where our price gaps are. Supply chain automation really helps." E-commerce is another area where Walmart is thriving, particularly with its Walmart Marketplace. A new Multichannel Solutions Program launched on Sept. 10 allows sellers to use Walmart Fulfillment Services to fulfill orders from any e-commerce site via Walmart's supply chain. Walmart LocalFinds, introduced this fall, helps shoppers locate specific merchandise near them. Walmart Marketplace has achieved more than 30% sales growth in each of the past four quarters, and the retailer's e-commerce business has delivered double-digit growth for six consecutive quarters.

Future Investments and Social Commerce

Social commerce is now a key focus for Walmart's future investments. During a recent visit to China, McMillon saw Walmart associates live streaming from the sales floor, promoting beauty products. This shows the potential of social commerce, including live streaming, in Walmart's future. Personalization engines will also become more important, and Walmart's personal shoppers will play a bigger role. McMillon believes that these initiatives will help the retailer stay competitive in the evolving retail landscape.