Walmart’s discount pricing has the retailer beating its own expectations.
On Thursday, the retailer raised its forecast and reported that quarterly revenue was up 5% as grocery sales drove profits. The brand now expects sales to rise by 3.75% to 4.75% for the year, up from the 3% to 4% range.
Walmart’s stock climbed 6% in premarket trading, and is still up over 6% as of midday.
“In this environment, it’s responsible or prudent to be a little bit guarded with the outlook, but we’re not projecting a recession,” Walmart’s chief financial officer John David Rainey told CNBC. “We see, among our members and customers, that they remain choiceful, discerning, value-seeking, focusing on things like essentials rather than discretionary items, but importantly, we don’t see any additional fraying of consumer health.”
In the United States, one in four grocery dollars is spent at Walmart. That added up to $264 billion in grocery sales across the U.S. for all of 2023. And inflation has only ushered in more consumers.
At the end of 2023, customers saw prices for staples like eggs soar by around 60%. Butter rose by 30%, and lettuce by 25%. As the price of groceries skyrocketed due to inflation, customers who had never shopped for groceries at Walmart found themselves seeking alternatives to their usual grocery stores that had gotten too expensive. More shoppers moved to stores like Walmart and Dollar General for groceries.
Yet even while inflation has recently cooled—a much-needed bit of relief for those struggling to keep the refrigerator full—Walmart seems to be holding onto shoppers. According to the latest data from the Bureau of Labor Statistics, the prices of some grocery items are still elevated. Americans who live paycheck to paycheck are still rightly weary about the price of groceries.
In an effort to keep up with Walmart’s grocery business, Target has gotten competitive with its grocery pricing, too. In May, the company cut prices on more than 5,000 popular grocery items.
“We know consumers are feeling pressured to make the most of their budget, and Target is here to help them save more,” Rick Gomez, executive vice president and chief food, essentials, and beauty officer at Target, said in the announcement. “Our teams work hard to deliver great value every day, and these new lower prices across thousands of items will add up to additional big savings for the millions of consumers who shop Target each week for their everyday needs.”
Walmart has leaned into its growing grocery market, too. The discount retailer recently launched a luxury food brand called Bettergoods. Vice president of creative design David Hartman previously told Fast Company the goal was to create a brand that’s “as desirable as the leading national brands.”
The brand also offers a variety of choices, like vegan as well as gluten- and antibiotic-free items, meaning customers no longer have to go to Whole Foods or Trader Joe’s for that variety.