Walmart’s US sales at stores open for at least a year jumped 5.3% year-over-year in Q3 to $114.9 billion as its operating income surged by 8.2% during the quarter to beat Wall Street expectations. The retail giant attributed 75% of its quarterly gains to sales driven by customers earning over $100,000 annually. While middle- and low-income earners have been the foundation of Walmart’s customer base as they continue to flock to its stores, the company highlighted that it had grown its market share in Q3 primarily due to sales driven by “upper-income households.”
Walmart share prices have jumped over 5.7% in the past five days to $91.80 on November 26 as the mega-retailer lifted its financial outlook on the back of robust holiday shopping season projections and a healthy balance sheet with $10 billion of cash and cash equivalents. Overall, there could be two primary reasons why high-income earners are choosing Walmart products and services over other big-box retailers.
Prolonged Inflation Luring Wealthy Customers Towards Value Products
Walmart’s substantial grocery gains, boosted by high-income customers, could be due to the company’s addition of wealthier customers, as they are also affected by the prolonged effects of sticky inflation. Signs of consumers from all income levels looking for value products at low prices despite cooling inflation could position Walmart in a uniquely strong place in the market.
At the same time, its rivals, including Walgreens and Family Dollar, struggle with thousands of store closures in 2024 as consumer demand for TVs, clothing, and new couches subside from record highs in 2021 and 2022. Many retailers hiked prices to the level where many consumers couldn’t afford the products anymore in a high-interest rate environment because borrowing became extremely costly at the peak of the latest inflation cycle.
Better Assortment Of Products, Expanding Online Operations
In recent years, Walmart has been pushing to expand its empire with middle-income customers as well as those making over $100,000 annually. The company has been heavily investing in its grocery segment and leveraging its enormous outreach to reduce product prices significantly. It also revamped its assortments of goods, including electronics, clothing, and home furnishings, alongside building a steady online presence to directly rival Amazon. Now, Walmart lets you buy online or opt for in-store pickup at thousands of stores.
Furthermore, customers also love the same-day grocery delivery membership scheme called Walmart+, evidenced by a 22% growth in online sales in Q3. “As we grow our (online) assortment, we’re able to appeal to more people and appeal to higher income levels,” Walmart CEO Doug McMillon said during the Q3 earnings call. “Those that have more discretionary income and want to save time are liking what we’re doing with both pickup and delivery.” He highlighted that management is striving to help people save more time and money as their in-store volumes grow and enable faster store pickups and delivery. The company increased its full-year net sales growth guidance to between 4.8% and 5.1%.
