Walmart’s business surges as shoppers hunt for low prices

Businesses from McDonald’s to Home Depot are struggling to attract financially strapped shoppers. But Walmart is growing as consumers search for inexpensive groceries, essentials and other merchandise.

Walmart said Thursday that sales at stores open at least a year increased 3.8% during its latest quarter from the same time last year. The company raised its sales and profit guidance for the year, a sign it expects growth to continue.

The largest retailer in the United States has used its size and buying power to keep prices lower than competitors even as inflation has surged since the pandemic, retail analysts say.

Groceries account for more than half of Walmart’s sales, and Walmart has benefited from its pricing advantage with prices around 25% lower than traditional supermarkets, according to analysts at Evercore IRI.

While low and middle-income shoppers have traditionally formed the core of Walmart’s customer base, Walmart also has grown with people making more than $100,000 a year, saying that its gains last quarter were “primarily driven by upper-income households.”

Walmart is also making gains online. Its digital sales, which include in-store pickup and delivery, grew 22% last quarter.

“Most Americans remain uncomfortable with food prices and are still actively looking for ways to keep their spending in check,” Neil Saunders, an analyst at GlobalData Retail, said in a note to clients Thursday. This has worked in “Walmart’s favor and has allowed the chain to continue to acquire new customers.”

Walmart’s stock jumped 7% during afternoon trading Thursday.

Meanwhile, department stores, home improvement retailers and other retail segments have taken a hit as stretched shoppers pull back. Fast food chains have also struggled.

Retail sales have slipped overall in recent months.

Home Depot’s sales at stores open for at least one year fell 2.8% last quarter, the company said this week, and some lower-income Americans are rejecting McDonald’s, opting to cook at home instead, according to McDonald’s.

“It’s a challenging consumer environment,” said Ian Borden, McDonald’s CFO, noting that many consumers are trying to manage inflation, higher interest rates and dwindling savings.

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