As we head toward a presidential election, the presumed candidates for both parties will look for issues that rally undecided voters.
The economy will be a key issue, with Democrats pointing to job creation and lowering prices while Republicans will cite the layoffs at Big Tech companies, high housing prices, and of course, sticky inflation.
The Covid-19 pandemic created a perfect storm for inflation and higher prices. It became harder to get many items because people getting sick slowed down, or even stopped, production at some factories.
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It was also a period where demand increased while shipping, trucking and delivery systems were all strained or thrown out of whack. The combination led to product shortages and higher prices.
You might have gone to the grocery store and not been able to buy your favorite paper towel brand or find toilet paper at all. That happened partly because of the supply chain and partly due to increased demand. At the end of the day, however, it led to higher prices, which some consumers blamed on President Joe Biden's administration.
Biden, of course, was blamed for the price increases, but as inflation has dropped and grocery prices have fallen, few companies have been upfront about it. That's probably not a political choice in most cases. Instead, some companies have chosen to lower prices more slowly than they raised them.
However, two major retailers, Walmart (WMT) and Costco Wholesale (COST) , have been very honest about inflation.
Walmart Chief Executive Doug McMillon's most recent comments validate what Biden's administration has been saying about the state of the economy. And they contrast with the economic picture being painted by Republicans in support of their presumptive nominee, Donald Trump.
Image source: Tim Boyle/Getty Images
Walmart sees lower prices
McMillon does not talk about lower prices to make a political statement. He's communicating with customers and potential customers through the analysts who cover the company's quarterly earnings calls.
During Walmart's fiscal fourth-quarter-earnings call, McMillon was clear that prices are going down.
"I'm excited about the omnichannel net promoter score trends the team is driving. Across countries, we continue to see a customer that's resilient but looking for value. As always, we're working hard to deliver that for them, including through our rollbacks on food pricing in Walmart U.S. Those were up significantly in Q4 versus last year, following a big increase in Q3," he said.
He was specific about where the chain has seen prices go down.
"Our general merchandise prices are lower than a year ago and even two years ago in some categories, which means our customers are finding value in areas like apparel and hard lines," he said. "In food, prices are lower than a year ago in places like eggs, apples, and deli snacks, but higher in other places like asparagus and blackberries."
McMillon said that in other areas prices were still up but have been falling.
"Dry grocery and consumables categories like paper goods and cleaning supplies are up mid-single digits versus last year and high teens versus two years ago. Private-brand penetration is up in many of the countries where we operate, including the United States," he said.
Costco sees almost no inflation impact
McMillon avoided the word inflation in his comments. Costco (COST) Chief Financial Officer Richard Galanti, who steps down on March 15, has been very transparent on the topic.
The CFO commented on inflation during his company's fiscal-first-quarter-earnings call.
"Most recently, in the last fourth-quarter discussion, we had estimated that year-over-year inflation was in the 1% to 2% range. Our estimate for the quarter just ended, that inflation was in the 0% to 1% range," he said.
Galanti made clear that inflation (and even deflation) varied by category.
"A bigger deflation in some big and bulky items like furniture sets due to lower freight costs year over year, as well as on things like domestics, bulky lower-priced items, again, where the freight cost is significant. Some deflationary items were as much as 20% to 30% and, again, mostly freight-related," he added.
Walmart shares were off 0.4% on Friday to $60.12 but are up 14% in 2024. Costco shares slumped 7.6% to $725.56 but are still up 9.9% on the year.
