Walmart's 24% Stock Rise Fueled By New High-Income Shopper Strategy And What It Means For Future Stock Growth

• Former Walmart CEO Bill Simon expresses concerns that the influx of high-income shoppers at Walmart might alienate traditional customers.
• Walmart's financial performance remains robust, recently reporting quarterly earnings that surpassed expectations.

Former Walmart Inc. WMT CEO Bill Simon notes that the increase in high-income shoppers poses some unique challenges. While these affluent customers have boosted Walmart's grocery sales, Simon worries this trend might marginalize those who rely on them for their traditionally lower prices.

He suggests this demographic shift could be temporary rather than permanent. The COVID-19 pandemic has accelerated the decline of traditional indoor mall retailers, pushing consumers towards discount and online stores due to inflation and changing retail environments.

This shift favors retailers like Walmart that offer cost and convenience. The company has responded with aggressive price cuts, particularly in their food departments, rolling back prices to pre-inflation levels to retain and expand their customer base.

The strategy attracts higher-income consumers looking to economize without drastically changing their shopping habits. However, Simon warns that the current trend of high-income shoppers at Walmart may be temporary.

Once economic conditions stabilize, these consumers may return to premium retailers that offer specialized services over convenience and pricing. This potential shift could undo their recent gains as economic factors like food inflation diminish.

Despite these warnings, Walmart's financial performance remains strong. The company recently reported quarterly earnings that exceeded expectations, with estimated earnings per share at $0.49 and actual earnings per share at $0.60.

This announcement caused the company's stock price to jump 7% the following day. Since then, the stock has continued to climb, adding nearly 2% in subsequent trading days and now climbing towards $100, a significant psychological level.

On February 26, the stock underwent a 3-to-1 split. After that, it consolidated between $58 and $61 before breaking out due to its earnings event.

Overall, this year has been positive for Walmart's stock, with a 24% increase so far. While the stock can be volatile at times, it consistently rises over the long term.

After the closing bell on Wednesday, May 22, the stock closed at $65.25, trading up by 0.15%.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.