The Unexpected Store Higher-Income Shoppers Are Flocking To
While gas prices have begun to drop from their record-setting highs this spring and summer with CNN reporting that prices on average are now below $4 per gallon for most of the country as of August 15, inflation has not gone away, particularly at the grocery store. According to Newsweek, that while overall inflation went down in July, food costs continued to rise, albeit at a slower rate than prior months, with the cost of "food at home" still up 13.1% over 2021 as of the end of the month.
Rising food prices are being felt by people across economic demographics, with even high-earners looking for ways to save money on staples. As a result, discount retailers like Walmart have seen a boost in sales from customers outside of its usual target audience. CNBC reports that the biggest retailer in the U.S. has seen an 8% growth in its second quarter of the fiscal year with the sales increase being focused primarily in the grocery and "essential" categories like health and wellness. Walmart attributes this to an increase in high-earning families seeking out deals at the notoriously inexpensive retailer in an effort to save money in a difficult economy. CNBC notes that about 75% of Walmart's new grocery customers come from households earning $100,000 or more annually. Additionally, sales of Walmart's in-house brands have also seen an increase in sales, showing a further demand for lower-cost grocery items.
Desperate for bargains
The increased grocery sales news is a bit mixed for Walmart and the overall economy. As CNBC notes, while the store has seen an 8% increase in sales, its profits are down, since the grocery products customers are searching out come with lower profit-margins than the more expensive home furnishings and electronics which have seen drops in sales, according to a CNBC report from July. Despite the increase in customers, the company still expects to see earnings per share to drop by 9 to 11% at the end of the year. The brand has attempted to further improve its revenues by adding perks to its Walmart+ subscription service, which provides free shipping and extra discounts to regular customers for a monthly fee. On August 16, following the news of the company's sales numbers, Walmart announced that members to the subscription service would now also receive a complimentary subscription to Paramount+, a clear effort to compete with Amazon (per Reuters).
While the news of increased sales sent Walmart's stocks up, the reliance of Americans on discount brands does highlight persistent issues in the economy. One of Walmart+'s largest selling points is that it comes with a discount on gas at partner retailers. Similarly, discount club store Costco has also managed to keep members paying for access by offering steeply discounted prices on grocery basics and inexpensive gas (per USA Today), showing that many Americans are so in search of bargains on essentials, they're willing to pay for them.