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Grocery sales rise as fast food prices rise

Getty Images (L) | Reuters (right)

Forget the drive-thru. Walmart wants diners to find a quality meal in its grocery aisles.

As fast food becomes more and more expensive, the nation’s largest grocer sees a sales opportunity.

On a call with CNBC Thursday, Walmart CFO John David Rainey said some of the discounter’s sales growth last quarter came from customers turning to its grocery aisles for cheaper meals than they can get at fast food restaurants.

“It’s about 4.3 times more expensive to eat out than to eat at home,” he said. “And it benefits our business.”

As customers see some grocery items staying the same price or even getting cheaper, the gap between buying items off the menu and cooking food at home has widened further, he said. he declares.

Walmart Stock hit an all-time high Thursday, after beating Wall Street expectations for quarterly sales and revenue and saying it expects its full-year results to be at the high end of the range, or even better than its previous forecasts. In the United States, transactions increased 3.8%, thanks to a growing number of customers visiting its stores and website.

Walmart’s strong store traffic and quarterly results are at odds with those of restaurant companies, notably McDonalds, Starbucks And Yum Brands. Foot traffic to limited-service chains, which include fast food and fast-casual restaurants, fell 3.5% in the first quarter, according to Revenue Management Solutions. Restaurant executives blamed bad weather in January and February and slowing consumption, particularly among lower-income diners.

Like many restaurants, McDonald’s has faced backlash over its prices. An $18 Big Mac combo sold at one of its franchise restaurants in Connecticut went viral on social media, prompting executives to defend the chain’s prices during its conference call. The burger giant reported a disappointing 2.5% growth in U.S. same-store sales, suggesting its foot traffic fell during the quarter.

Still, McDonald’s CEO Chris Kempczinski said consumers, especially those with lower incomes, are looking for deals. The chain will offer a $5 meal starting June 25 for about a month.

Not all restaurants have had trouble charging their customers higher prices: fast food chains like Chipotle, Wing stop And Soft green all reported strong sales in their most recent quarters.

Inflation data from the U.S. Department of Labor reflects the difference between the price customers pay for the foods they cook at home or prepare for lunch, compared to what they pay at a cafe or restaurant. In April, home food prices, a category that measures the total cost of food purchased at grocers or other food stores, were up 1.1% year over year . The price of food consumed outside the home increased significantly more: 4.1% over one year.

During the company’s earnings conference call Thursday, Walmart U.S. CEO John Furner highlighted a new tool in Walmart’s arsenal that it can use to compete more aggressively with restaurants: its new grocery brand, Bettergoods.

The premium range includes unique flavors and products suitable for more health-conscious customers or those following special diets, such as gluten-free or plant-based products. For example, it includes strawberries and cream Greek yogurt, curry chicken empanadas, restaurant-style chicken wings, and salted caramel oat milk ice cream.

Seventy percent of the brand’s items cost less than $5, Furner said — a price that could attract the attention of shoppers “trying to feed a family of four, five (or) six.”

—CNBC Amélie Lucas contributed to this report.

Walmart beat quarterly profit and revenue estimates

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