Walmart is cutting prices of clothes and general merchandise to appeal to inflation-hit shoppers

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• Walmart is cutting the prices of clothing and general merchandise, it said Monday.
• This is because soaring food and fuel prices mean shoppers have less money to spend on other items.
• Stores are struggling to cope with excessive levels of inventory, Insider previously reported.

Walmart is slashing the price of clothing to clear excess inventory and draw in inflation-hit shoppers.

Food prices in the US rose 10.4% in the year to June, the largest annual increase in more than 40 years, according to data from the Bureau of Labor Statistics.

Shoppers are spending more on food and fuel, meaning they're buying less from other product categories like clothing, Walmart said in a business update Monday.

As a result, the chain is having to cut prices on some products "to move through the inventory, particularly apparel," the retailer said.

Walmart is cutting the price of apparel on its website.

Grace Dean/Insider

Walmart had a third more inventory on April 30 than on the same day a year earlier.

Employees told Insider that the back rooms of stores were filled with pallets and outdoor storage trailers, with some workers blaming this on the company's inventory system which automatically orders supplies, including some that their stores already had in stock.

Some employees said that their stores resorted to using trailers to store the excess supply, while one shared a picture of a pile of boxes blocking access to a private breastfeeding room.

In a company earnings call in mid-May, CEO Doug McMillon said that inventory was up because of inflation, late deliveries, and intentional inventory buildup, and that the company would work through the excess stock in the coming quarters.

Walmart had been "aggressive" with its price rollbacks on apparel during the first quarter and had "higher than normal" markdowns on general merchandise, which fueled buying, Walmart executives said during the earnings call.

Unexpected markdowns caused a roughly $100 million hit on Walmart US's gross profit in the first quarter, CFO Brett Biggs said.

Walmart has rolled back prices on some of its general merchandise, including a Decathlon bike with a more than 50% discount.

Grace Dean/Insider

Other retailers have also slashed prices because of mounting inventory.

"During the quarter, the company made progress reducing inventory, managing prices to reflect certain supply chain costs and inflation, and reducing storage costs associated with a backlog of shipping containers," Walmart said in its update Monday.

McMillon, however, warned that the company would still need to introduce further markdowns on apparel.

The company issued updated guidance, saying it expected operating income for the quarter to late July to decline by between 13 and 14%, compared to its previous forecast of operating income either remaining flat or increasing slightly.

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