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Walmart CEO: People Are ‘Price-Focused’ Regardless Of Income Level

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Following are excerpts from the unofficial transcript of a CNBC exclusive interview with Walmart Inc (NYSE:WMT) President & CEO Doug McMillon.

He appeared on CNBC’s “Squawk on the Street” (M-F, 9AM-11AM ET) today, Tuesday, August 16th from Bentonville, Arkansas.

Walmart CEO Says People Are ‘Price-Focused’ Regardless Of Income Level

McMillon On Chasing Inventory

DOUG MCMILLON: And it’s important to remember just how much of a challenge we had being in stock a year ago.

For two years now because of all the things that happened related to the pandemic, we’ve been chasing inventory.

About two thirds of what we sell in the US is made or grown in the US. The other third is imported.

And in both instances whether it’s domestic or it’s imported, we were chasing it.

So part of the inventory increase is just to recover and have our side counters to be in stock and have the right amount of of inventory for the seasons.

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McMillon On Inflation Impact

MCMILLON: It's a conflicting period in terms of the data. If you look at what's happening across categories and across income levels, inflation is having an impact particularly for those who don't have as much money.

So we see them behaving in different ways. But we're also attracting a lot of new customers to come to our stores, to our app, to our website.

Higher income families are shopping at Walmart because they’re so price sensitive right now. We shared earlier this morning that families making more than 100,000 in household income have driven a lot of our growth during this last quarter.

Also the end of the month, end of the quarter performance was stronger than what we had seen in the first two months of the quarter so there's some things that are happening that are really encouraging.

McMillon On Food Inflation

MCMILLON: Right around the middle of the first quarter is when we saw food inflation reach a level where behavior started to change.

Food inflation in the US started ticking up the fourth quarter of last year and we thought that it would come up a bit more gradually and take more time but it went up fairly quickly.

And it went up more than what we expected it to go up and then kind of middle of March, it got to a level where people making less than $50,000 household income started behaving differently, and then to the $75,000 level and then to the $100,000 level.

McMillon On Challenges

MCMILLON: We've seen food inflation be persistent and continue to tick up, mid double digits as we've expressed. General merchandise is a little better.

The ports are clear, the transportation issues that we were all so focused on a while back have cleared up as time has gone on so we have a different set of challenges looking ahead than we've had in the last six months.

McMillon On Wage Inflation Being Forever

MCMILLON: I think wage inflation is going to be with us forever. So all the employers, including here at Walmart, we've raised our wages which we're happy to do that that creates a new level of which pricing has to be adjusted to reflect.

So I think there's some level of inflation that's going to be with us basically forever. Hopefully we'll see food inflation in particular improve as we go through next year.

McMillon On Walmart Plus

MCMILLON: Walmart Plus is important to us but one of the reasons that we don't emphasize it too much is because we don't want to be judged by one metric.

We have so many ways to evaluate our business and our total sales line, our GMV growth, all these other aspects and metrics matter too but Walmart Plus is strategic to us and we want more Walmart Plus members.

The primary offer there is food delivery as we learn to do grocery pick from stores for pickup, which is still growing at a really nice clip and is an important part of our business.

That unlocks the ability to do delivery and as we were discussing before we came on air, it includes delivery all the way into the home in some cases.

Which is a really exciting service that we have. So adding Paramount+ is just part of an ongoing plan to continue strengthening Walmart Plus so that more and more people want to be members.