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Wealthy consumers head to Walmart as inflation takes its toll.
Even wealthy people want deals.
Shoppers making more than $100k flocked to Walmart last quarter, boosting the Arkansas retail giant's U.S. sales by 8% to over $100B.
What to know
According to the U.S. Census's monthly retail data, in October, U.S. retail sales increased slightly over 7 percent compared to the same time last year. The data set I prefer excludes gas and car purchases. It's a good barometer for the overall health of the American consumer and retailers. Since inflation is currently around 8 percent, it's fair to say that American retail is stagnant—which means the distribution of dollars will become increasingly important.
Initially, it looks like Walmart's everyday low-price approach is capturing more sales—at the expense of other competitors. Target had a disastrous quarter, with profit cut in half.
Initially, it looks like Walmart’s everyday low-price approach is capturing more sales—at the expense of other competitors. Target had a disastrous quarter, with profit cut in half.
Grocery is driving Walmart's success
Across its portfolio, which includes Walmart, Sam’s Club and International stores, the company booked revenues of $153B—an increase of about 8%.
The biggest U.S. gains came in the grocery market, where Walmart already controls over 20% of the $800B market. “We do see a lot of new customers who come in via food and consumables,” the President of U.S. Walmart told investors. Executives predicted that grocery prices would remain “stubborn” for the foreseeable future.
Private brands and omnichannel capabilities shore up gains.
Walmart owns multiple private brands, including Great Value and Sam’s Choice. After stagnant sales throughout the pandemic, it saw share growth of 1.3% for the quarter.
For the quarter, Walmart originated 13% of all sales, or about $20 billion, online through its omnichannel capabilities. Management believes this is a key to ensuring its popularity with wealthy customers sticks.
The company’s retail media network experienced 40% growth in the United States. Analysts estimate the venture has margins upward of 70%.
The company plans to spend $20 billion on share buybacks for the quarter.
The company's string of success may just be starting. After two years of constant price increases, management plans to use its immense buying power to pressure suppliers into lowering costs. "We are trying to find ways with our current suppliers to get costs down," CEO Doug McMillion said, "provide value to customers and members, and we're trying to be creative about it."
In the past, this type of approach led to significant outsourcing and a race to the bottom across American manufacturing.
Hopefully this time it's just less margin.