Middle-class shoppers pinched by decades of high inflation have turned to supermarket discounters, boosting sales at Walmart and Dollar General.
While inflation has dropped to 7.7 percent, it remains stubbornly high as Americans have felt the pain in the grocery line, with many opting to find better deals.
While bread and milk are $4.79 and $8.99, respectively, at the high-end Whole Foods, the same items are more than half that at Walmart, and even less at Dollar General.
Similar savings can be seen with a pair of steaks, which cost nearly $32 at Whole Foods, while Walmart sells them for $16.77 and Dollar General for just $9. When it comes to a dozen eggs, the Whole Foods price is about $5.49, Walmart sells them for $3.23 and at Whole Foods, they’re $5.49.
While butter goes for $9.99 at Wholefoods, where it goes for only $4.48 at Walmart and $4.45 at Dollar General. And flour fetches about $6.39 at Whole Foods, where it costs $3.83 at Walmart and $4.50 at Dollar General.
On Tuesday, Walmart reported annual US sales growth of 8.2 percent from last year, beating Wall Street expectations as the stock soared by 7 percent as of noon.
The company says that about 75 percent of Walmart’s sales growth has been driven by households earning $100,000 a year, reflecting the flight of the middle class to its stores for better deals.
GlobalData Retail analyst Neil Saunders told CNN: ‘Despite tougher times, consumer desire for value and low-price plays into Walmart’s hands.’
The General Dollar, which boasts low-price regulars, has also seen an influx of wealthier spenders due to inflation, and its stock is up almost 4 percent on Tuesday, and 12.66 percent over last year.
More middle-class shoppers are heading to Walmart, Dollar General and other discount stores for better deals on groceries to save money amid rising inflation.
Annual consumer inflation fell below 8% last month for the first time in eight months
With annual U.S. sales growth of 8.2 percent from last year, Walmart has attributed its latest success to an influx of wealthier shoppers looking for bargains amid high inflation. Pictured, shoppers at Walmart in Brunswick, New Jersey
Along with reporting sales growth, Walmart noted in its report on Tuesday that its own private-brand sales also grew, signaling that customers are opting not to splurge on brand-name items to save in the checkout line.
The store also saw a significant three-month boost from the ‘back to school season’ promotion in the US.
Walmart Chief Financial Officer John David Rainey said CNBC that the rise of shopping at corporate stores reflects the reality Americans are still strapped for cash.
“Pocket book extended,” he said. ‘People have less discretionary income or less disposable income to spend on things – and so they are looking for value.’
Dollar General said it had the same effect, but the supermarket chain’s locations in Ohio are under scrutiny for allegedly taking advantage of people looking for better deals.
In early November, Ohio Attorney General Dave Yost accused at least 20 stores of price gouging, with inspectors finding that as much as 88 percent were cheaper on the shelves than in the actual checkout line.
‘Ohioans can ill-afford businesses that lure people in with promises of low prices only to trick them at the checkout counter,’ Yost said in a statement. ‘It seems like the company is trying to make an extra buck and hoping no one will notice.’
On Monday, five stores in Franklin County, Ohio, failed a second inspection looking into price gouging, NBC 4 reported.
Overall, the price of food and drinks across the nation has skyrocketed by 11.2 percent over the past year due to inflation, with meat and poultry prices up 9 percent and milk up almost 16 percent.
Walmart shares have been rising, with the retailer seeing its value jump more than 2 percent on Tuesday after a steady rise over the past six months
Dollar General has seen similar success, with its stock up nearly 4 percent
While Dollar General said it is also attracting more affluent customers, the chain’s branches in Ohio are under scrutiny for allegedly lowering mid-flight prices for better deals.
The consumer price index rose 7.7 percent in October from a year ago, marking the fourth straight month of declines from the 40-year high of 9.1 percent reached in June.
The producer price index for final demand, which measures inflation before it reaches consumers, only rose eight percent in October from a year ago, also marking the fourth straight month the figure has declined, the Ministry of Labor said on Tuesday.
Core inflation, excluding volatile food and energy prices, dipped to 6.3 percent on an annual basis, after hitting a four-decade high of 6.6 percent in September.
The numbers were all lower than economists had expected and Wall Street has reacted positively, with all three major indexes rising since the report.
The producer price index for final demand, which measures inflation before it reaches consumers, rose 8% in October from a year ago in the fourth straight month of decline.
The Dow jumped again on Tuesday, adding to the latest rally seen in the five-day performance
But with spending shifting back to labor-intensive services and the job market still tight, wage pressures could keep inflation painful for some time.
The Fed earlier this month delivered the fourth consecutive 75-basis-point interest rate hike and said its fight to lower inflation to the US central bank’s target of 2 percent will require borrowing costs to rise further.
However, the Fed indicated that it would be nearing an inflection point in what has been the fastest rate-hiking cycle since the 1980s.
Traders are now pricing in a 91 percent chance of a 50 basis point rate hike at the Fed’s December meeting.