- A trend that started earlier in the year is still being observed among consumers with higher incomes: they continue to shop at Walmart for groceries.
- Walmart’s largest grocery market-share gains in Q3 were attributed to households with incomes over $100,000
- Inflation has pushed shoppers to lower-cost stores and private label brands.
Walmart continues to be a favorite of the upper middle class for groceries.
Walmart’s third-quarter earnings were reported on Tuesday. The retailer delivered strong results and raised its guidance to 2023. Walmart, a big-box retailer that operates 3,500 grocery stores nationwide, reported a 8.2% increase in same store sales. But its grocery sales gains were even greater: Walmart stated that food sales saw “midteens growth”, which Walmart claimed was a result of higher-class shoppers.
John David Rainey (Walmart’s chief financial officer) stated during the call that Walmart has continued to grow its grocery market share from households of all income levels. Nearly three quarters of the share gains have come from households earning more than $100,000 annually.
It’s a fashion trend that is growing rapidly It began earlier in the year. Rainey explained to CNBC in August, that Walmart’s market share gains in grocery were primarily due to shoppers in this income bracket who tried to pinch pennies. There are some exceptions, however. Signs that inflation is finally coolingAmericans have been struggling for months. This has pushed wealthier shoppers away higher-end grocery chains to Walmart’s aisles.
“We are seeing more customers. We are seeing them in more types. We have historically seen many new customers in the last quarter via food and consumables. John Furner, Walmart US CEO, spoke during the conference call.
The Walmart customer typicalAccording to Numerator data, this woman is middle-aged and white. Her annual income is approximately $80,000. But the brand’s low prices and penchant for discounting — or in Walmart parlance, rollbacks — have also historically Attracted shoppers with lower incomes.
Grocery inflation is ‘especially stubborn’
Inflation Attained its highest rate since 1981 in June, but has slowly begun to cool: non-seasonally adjusted food prices rose 10.9% in October compared with the year prior — though still high, the year-over-year change was lower than the increase in September, according to Data from the Bureau of Labor Statistics.
Walmart CEO Doug McMillon mentioned during the company’s earnings call inflation being “especially stubborn” in categories like dry groceries, leading shoppers to be price-conscious.
He stated that Walmart would make sense to them if they were to see a rise in price awareness during a period when people are more sensitive.
Walmart observed that shoppers are also using Walmart’s private label brands to save their money. This is a trend Walmart first noticed earlier this year. Inflation pressure started to be felt by shoppers.
Furner stated Tuesday, “What we’ve really seen over the last three years was a flat penetration of private brands, not much movement between ’19 and 2021.” “The trading of private brands from other brands to trade with was really initiated in March this year.”
Walmart stated that shoppers traded down to private-label versions of dog food and baby products, as well as baking goods and proteins.
It’s that focus on low prices that’s helping Walmart lure shoppers from all income brackets — and report a strong quarter, according to analysis from Suzy Davidkhanian, principal analyst at Insider Intelligence.
Davidkhanian wrote that Walmart’s strong price point reputation helped the retailer win, again. “Despite a difficult retail backdrop — mixed economic headlines, ongoing supply chain woes and consumers continuing to spend on experiences — Walmart’s intensification in basics and replenishment goods, especially in grocery, coupled with its ongoing promise to roll back prices help the retail giant deliver strong quarterly results.”
