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Forget about driving by. Walmart Hopefully diners will find a value-for-money meal in their grocery store aisles.
As prices for ready-made meals rise, America’s largest grocers see a sales opportunity.
Walmart Chief Financial Officer John David Rainey said in a phone interview with CNBC on Thursday that part of the discounter’s sales growth in the latest quarter came from customers switching to grocery stores for more shopping than at fast-food restaurants. Cheap meal.
“The cost of eating out is approximately 4.3 times that of eating at home,” he said. “It’s good for our business.”
As customers see some groceries remain the same or even become cheaper, the gap between buying what’s on the menu and cooking at home has become wider, he said.
Walmart stock The company’s shares surged to a record high on Thursday after the company beat Wall Street’s quarterly sales and revenue forecasts and said it expected full-year results to meet or beat previous forecasts. U.S. transaction volume increased 3.8% as more customers visited its stores and website.
Walmart’s strong store traffic and quarterly results are at odds with restaurant companies, including McDonald’s, Starbucks and Yum Brands. Traffic at limited-service chains, which includes quick-service and fast-casual restaurants, fell 3.5% in the first quarter, according to Revenue Management Solutions. Restaurant executives blame bad weather in January and February and a slowdown in consumption, especially among lower-income diners.
Like many restaurants, McDonald’s has faced backlash over its prices.A Connecticut franchise restaurant sells $18 Big Mac combos viral on social media, prompting executives to defend the chain’s pricing on a conference call. The burger giant reported a disappointing 2.5% rise in U.S. same-store sales, indicating a decline in foot traffic during the quarter.
Still, McDonald’s CEO Chris Kempczinski said consumers, especially those with lower incomes, are looking for deals. The chain will offer $5 meals starting June 25 for about a month.
Not all restaurants have trouble getting diners to pay higher prices: fast-casual chains, e.g. Chipotle, wing stop and sweet green All companies have reported strong sales in recent quarters.
Inflation data from the U.S. Department of Labor reflect the difference between what customers pay to cook or pack a lunch at home and what they pay at a coffee shop or restaurant. Through April, household food prices, a category that measures the total cost of buying food at a grocery store or other food store, were up 1.1% from a year earlier. The increase in food prices outside the home was significantly greater: 4.1% higher than the same period last year.
During the company’s earnings call Thursday, Walmart U.S. CEO John Furner pointed to a new tool in Walmart’s arsenal that it can use to compete more aggressively with restaurants: its new grocery brand Bettergoods.
The high-end product line includes unique flavors and items tailored for health-conscious customers or those with special dietary habits, such as gluten-free or plant-based items. For example, it includes strawberries and cream Greek yogurt, curried chicken empanadas, restaurant-style wings and salted caramel oat milk ice cream.
Furner said 70% of the brand’s items are priced under $5, a price point that could attract the attention of shoppers “trying to feed a family of four, five or six.”
—CNBC amelia lucas contributed to this report.
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