Wal-Mart Chief Warns of ‘Serious’ Inflation in Coming Months

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walmartU.S. consumers face “serious” inflation in the months ahead for clothing, food and other products, the head of Wal-Mart’s U.S. operations warned Wednesday.

The nation’s largest retailer needs to get back to its roots as the lowest priced one-stop shop for consumers, Walmart CEO Bill SImon said.

The world’s largest retailer is working with suppliers to minimize the effect of cost increases and believes its low-cost business model will position it better than its competitors.

Still, inflation is “going to be serious,” Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY’s editorial board. “We’re seeing cost increases starting to come through at a pretty rapid rate.”

Along with steep increases in raw material costs, John Long, a retail strategist at Kurt Salmon, says labor costs in China and fuel costs for transportation are weighing heavily on retailers. He predicts prices will start increasing at all retailers in June.

“Every single retailer has and is paying more for the items they sell, and retailers will be passing some of these costs along,” Long says. “Except for fuel costs, U.S. consumers haven’t seen much in the way of inflation for almost a decade, so a broad-based increase in prices will be unprecedented in recent memory.”

Consumer prices – or the consumer price index – rose 0.5% in February, the most since mid-2009, largely because of surging food and gasoline prices. Core inflation, which excludes volatile food and energy costs, rose a more modest 0.2%, though that still exceeded estimates.

The scenario hits Wal-Mart as it is trying to return to the low across-the-board prices it became famous for. Some prices rose as the company paid for costly store renovations.

“We’re in a position to use scale to hold prices lower longer … even in an inflationary environment,” Simon says. “We will have the lowest prices in the market.”

Major retailers such as Wal-Mart are the best positioned to mitigate some cost increases, Long says. Wal-Mart, for example, could have “access to any factory in any country around the globe” to mitigate the effect of inflation in the U.S., Long says.

Still, “it’s certainly going to have an impact,” Long says. “No retailer is going to be able to wish this new cost reality away. They’re not going to be able to insulate the consumer 100%.”

{USA Today/Matzav.com Newscenter}

5 COMMENTS

  1. He is a CEO of an international conglomerate with his finger on the pulse of the world economy and is a realist-not an optimist or pessimist-but a realist, recognizing the reality if the the facts on the ground that costs are rising sharply across ALL commodities and this WILL be passed on to the consumer on a climbing scale going forward

  2. Inflation? Right. And Walmart will be leading the charge. What a great excuse for price increases – a preemptive strike predicting them. Keep an eye on this guy – Walmart didn’t get that big by playing nice. Ask all the small stores they’ve put out of business over the years.

  3. THE ECONOMICC FORCASTER GENIE CELENTE HAS BEEN SAYING FOR THE PAST 5 YEARS THAT 2012 WE WILL SEE INFLATION, FOOD RIOTS AND RISE IN VIOLENT CRIMES.
    WE NEED TO DAVEN FAST FOR A YESHUAS HASHEM!!!!!!!!!!!

  4. WALMART WHERE I LIVE USED TO BE A REALLY PRICE FRIENDLY STORE. YOU COULD GO THERE AND BUY PRETTY MUCH ANYTHING YOU NEEDED AND AT A GOOD PRICE. ALONG COMES THAT GOOD OLD FASHION “GREED” THING THEY WERE NOT SATISFIED WITH ALL THE MONEY THEY WERE ALREADY MAKING THEY WANTED MORE SO THEY DECIDED TO CHANGE EVERYTHING ABOUT THEM AND CATER MORE TO GROCERY PRODUCTS.THEY HAVE HIGHER PRICES THEN MOST GROCERIES STORE , THEY SUCK I USED TO LOVE GOING THERE NOW I CRINGE WHEN I GO TO GET A COUPLE PRODUCTS THAT HAVE A CHEAPER PRICE AND ITS A FEW CAT ITEMS. I AM SO DISTURBED AT WHAT THEY HAVE DONE AND IM SURE IT AFFECTS ALOT OF LOWER INCOME PEOPLE!! THANK GOD FOR THE DOLLAR STORES.

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