Walmart execs say own-brand sales are growing as customers cut spending, and suggest that other brands could put their prices down to compete

• More shoppers are buying private-label brands at Walmart amid economic uncertainty, execs say.
• CEO Doug McMillon told CNBC that by keeping prices low, Walmart could push other brands to drop their prices too.

High inflation and concerns about a potential recession are leading to a jump in own-brand sales at Walmart as consumers cut back on spending.

In times of economic hardship, shoppers often trade down, switching to budget brands or retailer own-label products. Customers focus more on value and become increasingly brand agnostic.

John Furner, CEO of Walmart US, said Tuesday during the company's earnings call that "acceleration" to private, or so-called white-label, brands had started in March 2022 and got "stronger" in the fourth quarter.

"We don't set targets for branded versus private brand, and we want to be there for any customer and make sure that quality and value are right across all our product lines," Furner told investors. "But there is definitely some acceleration to private brands in the last 90 days."

CFO John David Rainey said that customers were managing household budgets "more tightly, making frequent trade-offs and biasing spending toward everyday essentials." In response, Walmart is focusing on its value proposition and making sure it has high-quality private brands, he said.

Private-label brands are typically more profitable for retailers than big-name brands, and some can build a devoted following, like at German discount chain Aldi, and drive customer loyalty to the retailer. They also give retailers better control over supply chain and packaging.

A report by McKinsey & Co found that more shoppers turned to private-label brands during the pandemic – in part because supply-chain chaos meant other brands were harder to track down.

Walmart International CEO Doug McMillon told CNBC on Tuesday that the company planned to keep its own-brand prices low despite inflation and was "not participating in a recession if there is one." Lay's BBQ potato chips, for example, cost nearly two times as much for a 7.75-ounce bag as Walmart's Great Value equivalent.

McMillon told CNBC that by keeping its prices low, Walmart could push other brands to drop their prices. "I think we have historically shown that we can bring prices down," he added.