The cost of fast food in the United States is on the rise, but Walmart sees more sales opportunities. The country’s largest food and grocery retailer is striving to attract financially strapped customers while accelerating its own growth.
Walmart announced on Thursday (May 16) that sales at its stores open for at least a year increased by 3.8% compared to the same period last year. The retail giant has raised its sales and profit targets for this year, indicating that it expects the current growth trend to continue. Walmart’s stock price also surged to a record high on Thursday.
John David Rainey, Walmart’s Chief Financial Officer, said during a phone conference with CNBC that in the most recent quarter, many customers shifted to Walmart’s grocery aisles to purchase meals cheaper than at fast-food restaurants. This shift played a significant role in driving Walmart’s sales growth in the last quarter.
Rainey stated, “Eating out is about 4.3 times more expensive than eating at home. This is benefiting our business.”
He pointed out that as prices of some grocery items remain stable or become cheaper, customers are realizing a bigger cost gap between dining out and cooking at home.
Walmart’s strong store foot traffic and quarterly performance stand in contrast to fast-food chains such as McDonald’s, Starbucks, and Yum Brands. According to data from Revenue Management Solutions based in Florida, foot traffic at limited-service restaurant chains (including fast-food and casual dining) declined by 3.5% in the first quarter of this year. Restaurant industry executives attribute this situation to harsh weather in January and February, as well as a slowdown in consumer spending, especially among low-income diners.
Retail industry analysts point out that since the outbreak of the pandemic, Walmart, as the largest retailer in the United States, has maintained prices below its competitors thanks to its scale and purchasing power, even as inflation rates soar.
During Thursday’s financial call, John Furner, CEO of Walmart US, noted that Walmart can further intensify competition with restaurants using a new tool, its new grocery brand Bettergoods.