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Pinching pennies isn\u2019t just for cash-strapped shoppers. More affluent consumers are looking to save money, and they\u2019ve been a key demographic in propelling the continued blockbuster growth of America\u2019s largest retailer.<\/p>\n
Walmart<\/a> posted another knockout earnings Thursday, reporting a 4.8% year-over-year increase in quarterly revenue to $169.3 billion. Second-quarter sales increased 4.2%, beating analysts\u2019 estimates. The retail giant raised its guidance for the rest of the year from 3% to 4%, expecting sales to increase 3.75% to 4.75% for 2024. <\/p>\n Walmart hasn\u2019t witnessed a weakened consumer that some analysts and investors feared, CEO Doug McMillon said in Thursday\u2019s earnings call<\/a>. Shoppers are going to Walmart in droves\u2014regardless of how much money they make.<\/p>\n \u201cWe\u2019re also seeing higher engagement across income cohorts, with upper-income households continuing to account for the majority of gains, even while we grow sales and share among middle- and lower-income households,\u201d McMillon said.<\/p>\n Walmart reported increases in its health and wellness category and Sam\u2019s Club membership across income levels as well. It\u2019s a continuation of a pattern Walmart noticed earlier this year<\/a> of higher-income consumers driving sales growth.\u00a0<\/p>\n The company has benefited from an overall increase<\/a> in consumer spending recently. Navigating tentatively cooling inflation and a slowing job market, consumers are less willing<\/a> to shell out on discretionary goods and big homegoods purchases. They are, however, spending big<\/a> on bargain goods and groceries.\u00a0<\/p>\n It\u2019s these types of products that have largely driven Walmart\u2019s growth, led by its Bettergoods<\/a> private-label brand, released earlier this year. With bright packaging and a host of plant-based and premium products, the label has appealed to higher-income households looking for affordable healthier and more premium products. Higher-income consumers are actually more likely<\/a> to consider buying from Walmart than other retailers like Whole Foods and Trader Joes, according to May data from market research firm YouGov.<\/p>\n Affluent shoppers are also more likely<\/a> to shop online and have their groceries delivered, a trend that has coincided with Walmart\u2019s burgeoning e-commerce business, which grew 21% globally this quarter. During this period, weekly active online customers increased 20%, and store-fulfilled delivery rocketed 50% as Walmart promised speedy deliveries between one and three hours.<\/p>\n Higher-income consumers flocking to Walmart is good news for the retailer. But it\u2019s also a reason for all retailers\u2014even the high-flying Walmart\u2014to remain cautious about consumer spending. Though Walmart has weathered tough economic times\u2014as well as volatility from geopolitical events like the U.S. election\u2014CFO John David Rainey told analysts the company is \u201cnot immune\u201d to economic tensions, and neither are consumers.<\/p>\n \u201cWhen money is tight, people react\u2014even high-end consumers react,\u201d former Walmart U.S. CEO Bill Simon said in a CNBC Fast Money<\/em> interview<\/a> in May.<\/p>\n Other discount retailers have also noticed the trend<\/a> among wealthier shoppers. Dollar General<\/a> CEO Todd Vasos told analysts in June its higher-income consumers continue to focus on bargain brands, a symptom of not only cautious consumption, but of shoppers testing the waters of where to save and splurge.<\/p>\n \u201c[W]hat we\u2019re seeing is that the next cohort and the one above that\u2014so, let\u2019s call it middle- to upper-middle-income and then in some of the upper-income stratas\u2014we\u2019re seeing the trade-down still come in,\u201d Vasos said.<\/p>\n While affluent customers have helped Walmart soar even when the public at large largely remains trepidacious, it may be hard for the retailer to retain this key demographic in the long run, Simon said. Walmart has improved its shopping experience with store renovations, appealing own-brand product lines, and convenience shopping, but it\u2019s not the premium shopping experience wealthier consumers will look for as economic worries wane, he argued.\u00a0<\/p>\n \u201cAs the economic challenges abate\u2026service will become more important than convenience and price,\u201d he said. \u201cAnd we\u2019ll see a shift back of some of the consumers.\u201d<\/p>\n<\/div>\n