Walmart stock rises as shoppers boost its share of the grocery market

America's largest retailer is seeing the light in the darkest of times. Walmart shares surged 7% to a six month high yesterday after the retailer reported strong quarterly sales. Groceries are the MVP of its earnings report. Their quarter was boosted by kitchen staples such as canned beans and hotdogs.

In the cart: Food was the fastest growing sector with a double-digit growth in sales. This is because more customers turned to Walmart for its “everyday low price” products.

In the storeroom: Items such as TVs, air fryers, and clothing showed weak numbers. But Walmart did manage to unload some of its surplus inventory.

Target reports earnings today, and is also a supermarket go-to so these trends could be repeated.

From $6 fancy chocolate to $1 Hershey's: Walmart's CFO stated that customers are trading down… turning to cheaper options like beans, hot dogs, and store-brand items. This week's disappointing report from Tyson confirmed that there is a decline in demand for premium pork and beef. However, it's not only lower-income customers that are trading down.

Walmart saw an increase in high-income customers shopping for groceries at Walmart last quarter. 75% of Walmart's gains in grocery market share were driven by households earning $100K+.

Grocery prices are up 12% compared to a year ago, so discount retailers such as Grocery Outlet and Dollar General are also gaining customers.

It's a common theme: McDonald's reported that it's been attracting more high-income customers that are choosing fast-food restaurants over sit-down ones.

The Takeaway: Tough times can lead to opportunities for large companies to get a bigger slice of the market. Walmart grew its US grocery market share due to inflation, which encouraged higher-income customers to shop in its aisles. Walmart, Amazon, McDonald's, and McDonald's are corporate giants that can keep prices low during downturns to increase their market share (McD's did just that in 2008) while smaller or more expensive options suffer.