Customers with six-figure salaries fuel Walmart’s growth

New York
CNN
—

Walmart’s business is increasing. Customers earning more than $100,000 per year drive growth.

Walmart’s U.S. sales at stores open at least a year grew 5.3% last quarter compared with a year earlier, the company said Tuesday, and its profit grew 8.2% last quarter. Walmart raised its financial outlook, a signal that it expects a strong holiday shopping season.

Walmart said it gained market share last quarter, driven “primarily from higher-income households.” Households earning more than $100,000 a year accounted for 75% of the company’s gains.

Shares of the mega-retailer hit fresh highs on Tuesday morning, rising more than 3% after earnings results were released. The stock has consistently hit new highs over the past two months.

Low- and middle-income customers have traditionally been the core of Walmart’s customer base, and they flock to Walmart to save money. But Walmart has also focused on expanding with people making more than $100,000 a year in recent years — historically Amazon’s most important customer base.

Walmart, the largest retailer in the world, has attracted higher-income customers by investing in its grocery business and using its massive scale to drive down prices. It has also sharpened its range of clothing, electronics, home furnishings and other goods.

Walmart has also built a strong online operation to compete with Amazon. It has added the ability to buy online and pick up in-store to thousands of its locations and Walmart+, a membership program for same-day grocery delivery. Walmart’s online sales grew 22% in the US last quarter.

“As we expand our (online) assortment, we’re able to appeal to more people and appeal to higher income levels,” Walmart CEO Doug McMillon said on an earnings call Tuesday. Those who have more discretionary income and want to save time like what we do with both pickup and delivery.”

Walmart’s strength is a sign that consumers of all income levels are looking for low prices and value. Although inflation has slowed, Americans have been worn down by higher prices in recent years.

And while Walmart is booming, many retailers are struggling.

Chains are on track to close the highest number of stores in 2024 than any year since 2020, when the pandemic decimated the industry. Family Dollar, Walgreens, Big Lots and others are closing thousands of stores.

Closures have increased this year because the retail sector’s sugar high in 2021 and 2022 – when consumers got new sofas, televisions and clothes – is over. Companies have raised prices higher than many consumers can afford, and interest rates have risen sharply, making it more expensive to borrow money for big-ticket items or to get a mortgage or car loan.

This story has been updated with additional context and developments.