People who make more than $100,000 a year are grocery shopping at Walmart, and it's giving the chain a major edge over its rivals

• Higher-income consumers are still grocery shopping at Walmart, a trend that began earlier this year.
• Most of Walmart's grocery market-share gain in Q3 came from households making $100,000.

Upper middle-class people are still flocking to Walmart for their groceries.

Walmart reported its third-quarter earnings on Tuesday, delivering a strong performance and raising its guidance for 2023. The big-box retailer, which operates 3,500 grocery locations nationwide, saw an 8.2% increase in same-store sales in the quarter, but its grocery gains were even bigger: food sales saw "mid-teens growth," Walmart said, growth that appears to have been led by upper middle-class shoppers.

"We've continued to gain grocery market share from households across income demographics, with nearly three-quarters of the share gain coming from those exceeding $100,000 in annual income," John David Rainey, Walmart's chief financial officer, said during the call.

It's a trend that began earlier this year. Rainey told CNBC in August that Walmart's market-share gains in grocery were primarily driven by shoppers in that income bracket attempting to pinch pennies. Now, though there are some signs that inflation is finally starting to cool off, Americans' budgets have been strained for months, which has nudged wealthier shoppers away from higher-end grocery chains and toward Walmart's aisles.

"We're seeing more customers more often. We're seeing them in more categories. Historically, in the last quarter, we do see a lot of new customers who come in via food and consumables." John Furner, CEO of Walmart US, said during the conference call.

The typical Walmart customer is a middle-aged, white, suburban woman with an income of roughly $80,000 per year, according to data from analytics firm Numerator. But the brand's low prices and penchant for discounting — or in Walmart parlance, rollbacks — have also historically attracted lower-income shoppers.

Grocery inflation remains 'especially stubborn'

Inflation reached its highest rate since 1981 in June, but has slowly begun to cool: non-seasonally adjusted food prices rose 10.9% in October compared with the year prior — though still high, the year-over-year change was lower than the increase in September, according to data from the Bureau of Labor Statistics.

Walmart CEO Doug McMillon noted during the company's earnings call that inflation is being "especially stubborn" in categories like dry grocery items, leading shoppers across the board to remain price-conscious.

"During a period of time when people are more sensitive to price, it makes sense that they would increase the amount of their wallet that would be coming to Walmart because of value," he said.

Walmart noted that shoppers are also turning to Walmart's private-label brands to save money, a trend Walmart began noticing earlier this year as shoppers began to feel inflation pressure.

"What we've seen really for the last three years up until Q1 of this year was a flat private brand penetration, not much movement in '19, 2021," Furner said Tuesday. "The trading to private brands from other brands really started in about March of this year."

Shoppers traded down to private label versions of dog food, baby products, baking goods, and proteins, Walmart said.

It's that focus on low prices that's helping Walmart lure shoppers from all income brackets — and report a strong quarter, according to analysis from Suzy Davidkhanian, principal analyst at Insider Intelligence.

"Walmart's sharp price point reputation helps the retailer prevail, again," Davidkhanian wrote. "Despite a difficult retail backdrop — mixed economic headlines, ongoing supply chain woes and consumers continuing to spend on experiences — Walmart's intensification in basics and replenishment goods, especially in grocery, coupled with its ongoing promise to roll back prices help the retail giant deliver strong quarterly results."