Retiree Eileen Gowlak, 86, used to buy her clothes from Walmart when the retailer would have a big sale. But those days are over. “I noticed the clothing went up, and they don’t have the sales they used to have,” Gowlak said outside a store in North Bergen, New Jersey, in November. Price d out of Walmart, Gowlak simply isn’t buying new clothes right now. She is prioritizing groceries, and she’s not alone. “You’re seeing more consumer dollars go to necessities versus discretionary items,” John David Rainey, chief financial officer of Walmart U.S., said on a call with analysts last month. For millions of Walmart’s core customers, who tend to be lower- or middle-income and live in rural or suburban areas, wage growth is slowing, spending has fallen, and inflation and tariffs are making everyday purchases feel too expensive. So Walmart, the country’s largest retailer, has in recent years been warming to high-income shoppers. The company recently reported stronger-than-expected quarterly sales, as well as market share growth driven primarily by more affluent customers. Business Nov 14 Longtime Walmart CEO Doug McMillon to step down in January Economy Oct 13 Retailers forecasted to be cautious about hiring this upcoming holiday season: Report It’s reflective of a broader trend in U.S. consumer spending. Businesses — even ones that traditionally serve lower-income shoppers — are becoming increasingly reliant on customers at the upper end of the economic ladder. Experts describe these divergent groups of consumers as the two legs of a “K-shaped” economy. The wealthy, flush with gains from the stock market and higher wage growth, are driving an outsize share of consumer spending. On the other leg of the “K,” the rest of the population is stagnating or falling behind. Rising prices continue to dog consumers, even though the rate of inflation has come down from its heights during the Biden administration. Inflation has risen for five straight months and hit 3.02% year-over-year in September. Meanwhile, there are signs of a weakening job market. U.S. small businesses shed 120,000 jobs in November, according to the payroll processor ADP. The outlook was a little bit better for larger employers, but small businesses are considered the canaries in the coal mine for the U.S. labor market. Consumer confidence is also down, falling in November to its lowest point since April, according to a recent Conference Board survey. Reached for comment, a Walmart spokesperson pointed NBC News to the company’s most recent earnings release. A changing demographic Walmart has made major changes to draw in higher-income shoppers. The retailer is renovating more than 1,400 stores and has added more upscale products. “​​I think it’s indicative of how Walmart is changing and how our customer base is changing,” Rainey said at a retail industry conference in New York this month. “We continue to grow and gain share with this upper-income demographic.” For Mary Izzo, it’s a cult soft drink made with prebiotics, botanicals and plant fiber that gets her in the door. “I come here for my Olipops,” Izzo said outside a New Jersey Walmart. “And then, actually, I pick up some other stuff, too.” The renovations and inventory changes are part of the company’s effort to shed its original identity as a no-frills discount retailer and emerge as a tech-centric destination for consumers across the economic spectrum. On Tuesday, shares of Walmart will begin trading on the tech-heavy Nasdaq after more than 50 years of trading on the New York Stock Exchange. Other budget-friendly companies are also seeing more well-to-do shoppers. Dollar Tree’s CEO said last week that most of its new customers make more than $100,000 a year. Dollar General’s CEO, too, said it has seen growth particularly among higher-income shoppers. But to some analysts, a rise in wealthier consumers shopping at budget retailers is a red flag. “It concerns me when I hear that affluent customers are shopping at lower-price retailers like Walmart and TJX because it’s a sign that things are getting expensive all around,” said shopping expert Trae Bodge. “Obviously, if you’re more affluent, you can afford to buy the things you need. But if you’re seeking out lower prices, then where does the lower-cost consumer go?” ‘Better choices’ This isn’t Walmart’s first attempt to grow its share of higher-income consumers. The company saw a brief surge in higher-income shoppers during the 2008-09 financial crisis. But analysts found that many of these consumers returned to Walmart’s competitors when the economy improved. Fast-forward a decade, and soaring inflation in the wake of the Covid pandemic brought higher-income shoppers to Walmart once again. It started in the grocery section, where Walmart has been the dominant player in America for more than 20 years. Today, the company says, many higher- and middle-income consumers who previously stuck to the grocery aisles at Walmart are now shopping across the whole store. One of them is Peyton Riley, who lives with her husband and three kids in Mayfield, Kentucky. Riley, 32, used to go to Walmart for groceries, and now she buys clothes and home goods there, as well. “Our Walmart here, it just now revamped, so it’s almost starting to look like Target in a way, the way it’s set up and their clothing section,” she said. Riley, whose husband makes around $75,000 a year, has since cut back her spending at mass-market fashion retailers like American Eagle and Old Navy. “I don’t love the economy right now,” said Riley. “It’s not that we’re struggling. But we are trying to make better choices.” A season of spending and debt The National Retail Federation says a record 203 million people shopped during the Thanksgiving holiday weekend, and it expects holiday sales will top $1 trillion this year for the first time. But some industry experts are concerned about whether Americans on the low end of the current K-shaped economy will be able to afford everything they want to buy this holiday season. Some shoppers are financing their holiday purchases with short-term loans. A recent PayPal survey showed that around half of respondents said they planned to use “buy now, pay later” plans for their holiday shopping this year. The use of BNPL plans for online shopping hit a one-day record on Cyber Monday, topping $1 billion for the first time, according to Adobe. “People are going to be shopping this season no matter what, so whether they can afford to or not,” said Bodge, the shopping expert. “I do fear that consumers, both lower-income and upper-income, might be bringing some debt into 2026,” she said. ...read more read less