Inflation keeps budget shoppers away from Walmart. Attracting them isn’t easy, experts say – National

Walmart Inc WMT.N could face an uphill battle to win back U.S. shoppers who opted for the neighborhood dollar store or Aldi over heading further afield to a Walmart Supercenter when gas was $5 a gallon.

As gasoline prices have fallen nearly 20% over the past month, there is no sign of shoppers returning to the nation’s largest retailer, foot traffic data reviewed by Reuters and analysts shows. .

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Inflation remains at its highest level in 40 years, devouring much of the grocery budgets of many Americans, especially Walmart’s legions of cost-conscious shoppers.

Foot traffic at Walmart’s 3,573 U.S. supercenters and 370 discount stores (as of Jan. 31, 2022) fell an average of 2.7% from June 1 to July 25 from a year earlier, Placer data shows. .ai, a location analytics company.

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Meanwhile, traffic increased 11.5% at Aldi ALDIEI.UL, owned by German discount grocer Aldi Süd, and shopper visits increased 4.1% at Dollar General.

The question of how to reverse the loss of foot traffic will likely be front and center for analysts when Walmart reports second-quarter results on Aug. 16.

It may not be easy – or cheap.

Burt Flickinger, chief executive of Strategic Resource Group, said Walmart needed to invest more in local advertising to draw people into stores.

Reducing local newspaper ads has become Walmart’s “Achilles’ heel,” Flickinger said. If the company wants customers to come back, Walmart needs to spend more money on “high-value ads” that highlight promotions and throwbacks.

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Walmart shoppers have a median household income of $73,000, according to data from Numerator, a consumer analytics firm.

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In June, inflation hit 9.1%, a four-decade high, while gasoline prices climbed to $5.006 a gallon on average (June 13), from $3.161 a year earlier, according to the US Energy Information Administration. According to several economists, rising gas prices have taken hundreds of dollars off the monthly spending budgets of the typical low-income American.

Walmart CEO Doug McMillon has previously called the retailer an “inflation fighter” and a destination of choice for shoppers during a recession. But Walmart’s share as the top choice for grocery shopping fell to 25.5% in July from 27.4% in June, according to a monthly Prosper Insights & Analytics survey cited in a memo from Cowen & Co. .

McMillon recently told investors that shoppers — particularly from lower-income households — bought fewer items in the three months to April 30, even as they also consolidated their trips to the store in response to the rising fuel prices.

Monthly gas spending in July hit 5.57% of income for a typical US household — which earns $5,412 a month after taxes — up from 2.79% of income in December 2019, according to GlobalData. Poorer households generally spend more of their income on gasoline and basic necessities.

Walmart supermarkets, which average about 190,000 square feet (17,651.6 square meters) and sell groceries and deli items, as well as clothing, household goods and electronics, tend to be located outside major metropolitan areas, requiring many buyers to travel at least several miles. Supercenters do not sell gasoline.

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Walmart and Target Corp TGT.N issued profit warnings over the past two months, noting U.S. shoppers responded to rising costs of living by buying mostly low-margin food and other essentials , while skipping the aisles filled with clothing and sporting goods.

Walmart’s late July warning was “a diagnostic look at the average American household,” said Jefferies analyst Stephanie Wissink. It showed the squeezing of shoppers’ monthly budgets which also led many of them to cut back on their trips to grocery stores, she said.

At the 1,937 Target stores, traffic declined from mid-June through the week of July 25, according to data from

While Walmart has the advantage of offering greater selection, more convenient dollar store locations offer an advantage when fuel prices are high, said Jason Benowitz, senior portfolio manager at Roosevelt Investment Group.

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Shopper visits to Dollar General DG.N stores increased for all weeks of June and most of July, compared to the same period last year, the data showed. Dollar General operates more than 18,400 stores in the United States, compared to Walmart’s 5,342 U.S. stores, according to its latest annual report.

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“The driving distance for a typical shopper in much of the United States can be twice as far to reach the nearest Walmart compared to a dollar store,” Benowitz said.
(Reporting by Arriana McLymore and Siddharth Cavale in New York Editing by Vanessa O’Connell and Matthew Lewis)

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