Walmart CEO Doug McMillon says even wealthier families are penny-pinching

Walmart CEO Doug McMillon said even wealthier families are penny-pinching as inflation drives up the price of groceries.

In an interview Tuesday on CNBC’s “Squawk on the Street,” the leader of the nation’s largest grocer said sales in the fiscal second quarter got a lift from new customers and more frequent trips from households with an annual income of $100,000 or more. The retailer reported earnings and revenue that beat expectations for the three-month period, after slashing its profit outlook last month.

“People are really price-focused now, regardless of income level” McMillon told CNBC’s Courtney Reagan. “And the longer this lasts, the more that’s going to be the case.”

Inflation has soared at its fastest rate in decades. The prices consumers pay for goods and services were up 8.5% in July from a year ago, according to the Bureau of Labor Statistics. Gas prices have declined recently, but grocery prices remain very elevated.

Food prices are up 10.9% over the past 12 months as of July. Many everyday items have jumped far higher, including egg prices that are up 38% and coffee prices that are up more than 20%.

McMillon said that prices for food began ticking up late last year and that the company noticed changing shopping patterns for consumers even at higher income levels around mid-March. As people felt stretched by summer vacations or saved up for the back-to-school season, he said they started to buy less apparel and other discretionary merchandise — a dynamic the discounter expects will continue.

Plus, McMillon added, he is not sure that food prices have peaked. Yet he said “it’s a conflicting period when you look across the data.”

For instance, the retailer has had to cancel orders and mark down a lot of discretionary merchandise as people spend more on necessities. On the other hand, he said back-to-school supplies are selling well, as is low-priced men’s flannel.