Walmart CEO Has Concerning Prediction For Grocery Prices In 2025
Despite the fact that interest rates finally started to come down in September 2024 (thanks to this Federal Reserve Committee), consumers might not find themselves experiencing any significant price changes. In fact, they might feel like they are in the same expensive position they have been since the beginning of the post-pandemic period. According to the latest Consumer Price Index data for November 2024, inflation actually rose 0.3% to 2.7%. It's also worth noting that inflation has been increasing every month since July 2024, proving just how complicated it can be to reach the Federal Reserve's 2% inflation target rate. All of this brings us to grocery prices, which have been at record highs for consumers.
A Nerdwallet analysis of CPI data found that food prices, in particular, are up 28% since 2019, which has further financially strained many Americans. While certain products like eggs (which are currently experiencing skyrocketing prices thanks to avian flu) are almost guaranteed to stay expensive due to specific circumstances, consumers might have been hoping for some general financial reprieve with their groceries in 2025. However, despite lowering interest rates and generally lower interest rates (compared to 2021 and 2022), consumers might be in for more of the same — especially when it comes to their groceries. At the 2024 Morgan Stanley Global Consumer and Retail Conference, Walmart CEO Doug McMillon explained that consumers should expect currently inflated food prices to remain high in 2025. Even worse, he warned that some items could continue to increase in price rather than come back down.
What's impacting prices
McMillon addressed the company's price increases in a recent conference call, citing pandemic and inflation as primary influences. He went on to say, "It's been a challenge to go through the last few years with these higher costs, and we're doing everything we can to try and get prices down, including having 6,000 rollbacks in the US right now." However, MoneyDigest warns against trusting Walmart's rollback pricing tactics. McMillon also called out the generally lower-income consumers that tend to shop at Walmart (41% of their active monthly users made less than $50,000 in 2024, according to Mercatus), "I want to be sensitive to those that have lower income levels and acknowledge that this inflationary cycle has been really detrimental and created a lot of pressure for them and their families, and we're sensitive to that."
However, it's important to realize that while Walmart might quote inflation or more expensive costs as the reason behind their increased prices, they also just posted a 5.5% increase in revenue growth for the third quarter of 2024. All of that is to say that many corporations are making money off of their price increases, which makes the likelihood that those prices will come back down slim (even if the aforementioned costs associated with the products did come down). McMillion, and other executives, regularly mentioned customer resiliency during their recent call, which could be interpreted as a sign that customers have remained loyal despite price increases (and therefore offering little incentive to drop those prices to previous levels).
How could tariffs affect prices
Many consumers and economists are left wondering how president-elect Donald Trump's proposed tariffs might negatively impact consumer prices in 2025. As of late November 2024, Trump stated he wants to increase the current tariff rate on China by 10% and add a 25% tariff to all goods imported from Mexico and Canada. This would considerably increase the cost of getting foreign products into the country, with most companies passing off those costs onto consumers through increased prices. This brings us to retailers like Walmart, which heavily favor products imported from foreign countries.
Walmart CFO John David Rainey explained during a November earnings call, "We've been living under a tariff environment for seven years, so we're pretty familiar with that. Tariffs, though, are inflationary for customers, so we want to work with suppliers and with our own private-brand assortment to try to bring down prices." However, according to Reuters, 60% of Walmart's shipments came from China in 2023. While this was a noticeable shift from the 80% of its goods it got from China in 2018, it's clear the company still heavily relies on Chinese goods. This could lead to more immediate price increases in 2025, depending on how, if, and/or when Trump's tariff policy goes into effect (he has stated he would implement the policy via executive order on inauguration day – January 20, 2025). It is worth noting that Walmart has increasingly moved elements of its supply chain to India instead, perhaps in anticipation of the ongoing trade war situation with China.