Walmart’s recent success is thanks to affluent shoppers, retailer says

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Walmart may have started as a retailer geared toward budget-conscious consumers, but its customer base continues to grow thanks to more affluent shoppers.

The retailer saw share gains in new customers across income levels, largely led by higher-income households earning more than $100,000 in annual income, Walmart officials said during an earnings call Tuesday.

Walmart, in an earlier earnings call, had also highlighted the increase in its higher-income customers.

“Walmart has thrived among higher-income consumers based on its promise of being an everyday discount retailer where consumers can maximize their budget and get value for money because all income groups, whether low-income, middle-income or high-income , has faced the prospect of punishing inflation over the past few years, particularly in food, Neil Saunders, retail analyst at analytics and research firm GlobalData, told USA TODAY.

All consumers are looking for savings

While higher-income earners can absorb more of the price increases in their budgets than lower-income groups, “they still don’t like having to spend a smaller fortune on food and groceries. They still get sticker shock from seeing those things,” he said.

Saunders said he believes when affluent shoppers have given Walmart a chance to save money, “I think sometimes they’ve been pleasantly surprised because Walmart today is not quite the same Walmart for 10 or 20 years ago. It’s still at a low price, but it has a more sophisticated offering. The stores look better.

“So they’ve gone there for the low prices and enjoyed it, but they’ve kind of stuck around because they’ve said ‘Actually, it’s not that bad,'” Saunders said.

Some stigma is gone from shopping at Walmart

Saunders said a stigma that may have previously existed among some shoppers when it came to shopping at Walmart has disappeared.

“The honest truth is that a lot of the things that Walmart sells are sold elsewhere,” he said. “Why would you pay over the odds for the exact same product just because you sniff the place where you buy it? It just doesn’t make a lot of sense.”

Shoppers can also make purchases and get Walmart’s low prices without ever setting foot in a store with Walmart’s delivery and pickup options, which the retailer has invested heavily in, Saunders said.

Affluent shoppers mostly buy groceries at Walmart

Saunders said he continues to expect Walmart to gain more higher-income consumers, even with inflation easing a bit, because people’s budgets are still under pressure.

The new more affluent customers come to Walmart primarily for the low food and grocery prices, Saunders said.

“Walmart has had a little more difficulty getting some of these higher-income consumers to cross the aisle and shop for non-food products like clothing and home,” he said.

Walmart saw growth across categories

In the third quarter ended Oct. 31, Walmart’s U.S. comparable sales rose 5.3%, beating analysts’ estimate of a 3.61% rise, according to data compiled by LSEG and reported by Reuters.

It saw sales growth across categories, including the general merchandise segment, which has suffered over the past two years due to inflation. The retailer also saw a boost from sales and home goods, Reuters reported.

Walmart also had comparable sales growth in its health and wellness category, helped by demand for weight loss medications.

The retailer’s focus on household and grocery products has insulated it from a slowdown in spending on non-essential goods, helping the company deliver better-than-expected quarterly results in the first half of the year, Reuters reported.

As purchasing power increases, Reuters reported that analysts expect upper- and middle-income consumers to be the primary drivers of a shift back to spending on non-essential or convenience goods.

“I think Walmart has captured a more affluent consumer,” Telesey Advisory Group analyst Joseph Feldman told Reuters. “I think the Walmart Plus membership has helped drive that, and the company continues to reflect good strength in their online business and their selection. up and delivery.”

Reuters contributed to this report.

Betty Lin-Fisher is a consumer reporter for USA TODAY. Reach her at [email protected] or follow her on X, Facebook or Instagram @blinfisher. Sign up for our free newsletter The Daily Money, which will include consumer news on Fridays, here.