Walmart commits to low grocery pricesWalmart commits to low grocery prices

With possible tariffs with Canada and Mexico looming and food inflation lingering, Walmart used its fourth-quarter earnings call on Thursday to reaffirm its commitment to keeping grocery prices low, especially for items like eggs, bacon, and ground beef.

The biggest news for grocers?

Grocery continued to be a standout category in the fourth quarter, registering mid-single-digit growth. Walmart also saw mid-teens growth in health and wellness, largely due to GLP-1 sales.

“Our focus on lowering pricing through rollbacks continues despite pockets of food inflation in areas like eggs, bacon, and ground beef,” said McMillon. “Food remained inflationary in the low single digits.”

It was another strong quarter for the Bentonville, Ark.-based retailer, which saw gains with upper-income customers. Adding to the success, Walmart introduced same-day delivery for pharmacy and saw continued momentum in ecommerce and overall delivery fulfillment.

Walmart CEO Doug McMillon said during the call that same-day pharmacy delivery has seen strong early responses.

“Customers love being able to get a basket of items delivered to their door that includes fresh, frozen, general merchandise, and now pharmacy,” he said, noting that Sam’s Club recently launched a new shipping offer with free same- or next-day delivery.

Related:Messy end to merger results in Albertsons debt issuance

In late January, Walmart announced that it was expanding its Same-Day Pharmacy Delivery service to 49 states. This move positioned the retailer ahead of Amazon in the same-day pharmaceutical delivery game, as Amazon is still building its pharmacy fulfillment centers in 2025.

By the numbers

Tariff trouble?

When asked about the disruption of tariffs imposed by the Trump administration, Walmart leadership expressed little concern and said they would manage any price increases from tariffs as they have in the past.

“As we’ve been saying, tariffs are something we’ve managed for many years; we’ll just continue to manage them,” said McMillon. “We can’t predict what will happen in the future, but we can manage it really well.”

Walmart CFO John David Rainey acknowledged the uncertain times and noted that there’s still a lot of the year to play out.

Related:Sprouts posts a ‘remarkable’ 2024

“And we don’t want to get ahead of ourselves here … we feel good about our ability to navigate the environment,” Rainey said during the call.

Ecommerce is clicking

Walmart’s ecommerce sales in the U.S. rose by 20% year-over-year in January, while Sam’s Club saw a 24% increase, driven by club-fulfilled pickup and delivery. Rainey praised the profitability of ecommerce, stating that Walmart saw an 80% improvement in ecommerce losses in the U.S. alone last year.

“Ecommerce economics continue to improve,” said Rainey.

The incremental margins in Walmart’s ecommerce business globally during the fourth quarter were 11%, double the rate of the retailer’s overall margin.

Ecommerce profitability is also supported by the densification of the network. Instead of delivery drivers dropping off packages at individual houses, they now deliver to four or five houses on the same street, spreading costs over higher volumes.

Gathering and delivering

Store pickup and same-day delivery are vital to ecommerce, and Walmart had impressive numbers to share during the fourth quarter. Same-day deliveries within three and one hour grew 180% year-over-year, largely due to the increasing number of Walmart Plus members.

Related:Loblaw sees profits under pressure

Rainey said over 30% of Walmart customers are now paying extra for one-hour or three-hour deliveries. Over 5 billion units were delivered via same-day delivery last year, marking over 100% growth.

Wally’s world

It wouldn’t be a modern-day earnings call without a discussion of AI. Walmart has introduced a new AI agent for merchants, named Wally. Wally is helping the retailer identify the root causes of issues like out-of-stocks and overstocks with greater accuracy and speed. Walmart also introduced new coding assistance and completion tools that streamline deployments and deliver code faster with fewer bugs. McMillon said the tools helped Walmart save about 4 million developer hours last year.