Walmart stock pops 6% because inflation means even high-earners are reaching for discount groceries

Walmart’s sharp retail wit is resonating well with consumers, especially high-income shoppers.

Shares of Walmart popped by 6% during early hours, after the U.S. retail giant reported strong first quarter earnings. That rise was led by high income customers, as well as its e-commerce and advertising businesses.

“Our team delivered a great quarter. Around the world our goal is simple – we’re focused on saving our customers both money and time,” said Doug McMillon, Walmart’s CEO, in the company’s earnings release.

Walmart beat Wall Street’s expectations. For the first quarter, it reported revenue of $161.5 billion, about $0.60 cents a share. Analysts forecasted it would report $159.5 billion, about $0.52 cents a share.

The retailer also lifted its full-year guidance. It now expects to be at the high-end or slightly above its previous guidance for net sales growth of 3.0% to 4.0%.

Walmart’s quarterly results highlight how as inflation pushes prices up, consumers are turning to the big-box retailer for value that stretches their dollar further. Sales are also expanding demographics. Walmart said its cheaper items are resonating with higher-income households, which primarily led share gains, according to its earnings release.

In a research note earlier this week, Bank of America analysts said that Walmart was likely to benefit from its grocery unit, despite prices being 25% higher when compared to 2022. Walmart could stand to benefit even more from the grocery sector after launching its premium grocery brand, Bettergoods last month. In March, in a bid to attract more affluent shoppers, the retailer said it would be remodeling its stores to spotlight pricer items.

During the first quarter, Walmart said sales were being driven by in-store and digital transactions, with the latter growing the most. Visits to Walmart increased 3.9% year-over-year, according to foot traffic analytics company Placer.ai. Meanwhile, its e-commerce business, which includes pickup and delivery, grew 22% during the period. That may in part be thanks to two new initiatives launched in March, including an early morning delivery service as well as the sale of AI-powered software for its company partners that would enhance navigation routes and reduce delivery times.

Walmart’s growth efforts are far-reaching but so are its cost cutting measures. Late last month, the company said it would be closing all 51 of its healthcare service centers because they were not profitable.

The economic decision spilled over. This past week, Walmart said that it would do away with hundreds of corporate roles and request that some of its remote workers relocate. In a memo to employees, Walmart’s chief people officer Donna Morris said remote workers would be asked to move near the company’s headquarters in Arkansas, with some moving to its San Francisco Bay or New Jersey hubs.