Wealthier shoppers turn to Walmart for groceries

Growth in the Consumer Demand for Low-Priced Foods and Other Electronic Products During the Fourth Quarter of the U.S. Retail Christmas Season

Fruits and vegetables surged 1.6% for the month, while cereals and bakery products rose 0.9%. In August, other groceries increased by 1.1%.

A number of factors have contributed to the surge in prices. They say they’re paying more for labor and packaging materials. Severe weather, such as flooding, has hurt crops and led to the killing of egg-laying hens, squeezing supplies.

“The environment clearly is still very inflationary with a lot of supply chain challenges across the industry,” Pepsi

            (PEP)CEO Ramon Laguarta said on an earnings call Wednesday. The company's prices rose every year.

Meanwhile, demand is high. Consumers may be able to pull back on some discretionary items, but they have to eat. Many people are still working from home, and are eating more of their meals there, than they used to.

Many shoppers also prioritized groceries and daily essentials over higher-priced discretionary items. Walmart stated last quarter that its grocery sales had increased in the mid-teens.

Walmart, the nation’s biggest retailer, reported sales growth of 8.2% last quarter at stores open at least a year. The results beat expectations and pushed Walmart stock up over 6% in pre-market trading Tuesday.

“Although times are tougher, consumers’ desire for value and low-prices is playing into Walmart’s hands,” Neil Saunders, an analyst at GlobalData Retail, said in an email to clients Tuesday.

Growth during the holidays was led by grocery sales, the company said, as shoppers bought essentials instead of gifts. Government inflation data shows grocery prices have increased, and more shoppers are going to discount stores such as Walmart to save money. Sales were slower for traditional holiday products like toys, electronics and clothing, a sign that some consumers were cautious on discretionary spending.

Walmart had to mark down the prices on many items in order to make more money. Many retailers are oversupplied and are promoting more products than they were a year ago to spur customer demand.

A year ago, the National Retail Federation estimated holiday sales to increase between 12% and 18%, but this year they project growth to be between 6 and 8%.

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Walmart will raise its minimum wage from $12 to 14 in an effort to retain store workers who work in lower wage industries. Home Depot said it will spend $1 billion this year onraise wages and other compensation.

The retail sector is facing a more difficult period. Holiday sales were sluggish for many retailers, and the industry is expected to have a weaker 2023.

Bankruptcies are piling up: Party City, Tuesday Morning, mattress manufacturer Serta Simmons and Independent Pet Partners, a pet store retailer, have filed for bankruptcy in recent weeks.

Bed Bath & Beyond, Rite Aid, Joann Fabric and other chains are also on bankruptcy watch, according to credit rating agencies. These companies have struggled for a long time and are most vulnerable to difficult economic conditions.