How inflation-squeezed ‘value’ shoppers are saving money at Walmart

If anyone gets the American shopper, it’s Walmart.

As the Trump administration and the Democrats play the blame game on the economy, Walmart has positioned itself to take full advantage of the affordability crisis.

Last quarter, sales at the nation’s largest retailer jumped nearly 5% in the U.S. as inflation-stressed shoppers worried about the economy visited stores more frequently and spent more. E-commerce sales also increased more than 25% from a year ago.

On Thursday, Nov. 20, Walmart also hiked sales and issued a bullish outlook, hinting at a merry holiday shopping season ahead, even as other retailers like Target, Home Depot and Lowe’s cut profit guidance.

It’s not alone. TJX Cos., which owns discount retail chains TJ Maxx, HomeGoods and Marshalls, also raised its full-year forecast and expressed optimism about the holiday season. In September, Costco topped quarterly estimates amid inflation-spurred bargain hunting.

More than anything, the tale of this retail earnings season is the rise of the value shopper.

By keeping prices low as more Americans struggle to afford basic necessities such as housing, utilities and groceries, these retailers are appealing to shoppers across the spectrum, from affluent households hunting for bargains to low-income households struggling to make ends meet.

A New Harris poll found that 1 in 3 six-figure earners described themselves as financially stressed. The top 10% of earners drive more than 49% of all consumer spending, the highest level in decades of data, according to research by Mark Zandi, chief economist of Moody’s Analytics.

Chief Financial Officer John David Rainey told CNBC Walmart is seeing “value-seeking” spending patterns. Those patterns have been led by middle-class and upper-income households looking to save money and also by lower-income shoppers switching from Dollar General and other discount stores.

“It stands to reason, if there’s a little incremental strain on the consumer, they’re only going to become more so, they’re going to look for more value,” Rainey said.

CEO Doug McMillon told analysts on an earnings call that middle- and lower-income households have switched to cheaper alternatives. Executives also said, despite rising costs, Walmart would hold off on hiking prices as long as possible and instead would absorb the added expenses from tariffs.

Here again, Walmart has an edge in bringing value to shoppers: Its grocery business. Of the 7,400 active price rollbacks, most of the cuts are on groceries.

From the government shutdown and delayed benefits to persistent inflation, the high cost of living has become the dominant narrative in American life.

It has also emerged as a top issue worrying voters. Inflation and the economy now rank as Americans’ chief concerns, according to a CBS News poll.

With pocketbook issues a critical factor in who holds power in Congress after next year’s midterm elections, the Trump administration has announced a plan to give low- and middle-income Americans $2,000 checks funded by tariff revenue, among other steps.

Julie Craig, vice president for shopper insights, said Kantar’s monthly tracking data shows a decrease in shoppers saying they feel positive about their ability to afford everyday essentials.

“We see this decrease across all income levels, even higher income shoppers, indicating that there may not be as much insulation among more affluent shoppers as we saw previously,” Craig said. “We are definitely seeing shoppers wanting to get better at managing their budgets and avoid impulsive spending, and over two-thirds of shoppers tell us that they will need to be cautious about spending in the near future.”

Analysts say it’s not just the economic strain propelling sales at Walmart and TJX. It’s a psychological one.

“The consumer is very clearly seeking value for money, even more so than they have done previously,” said Neil Saunders, managing director of GlobalData Retail. “Some of this is economic as inflation is still biting a little but some is also psychological as there is a lot of uncertainty about the economic future swirling around. This all makes people more conscious of what they spend.”

This article originally appeared on USA TODAY: How Walmart is tackling the affordability crisis