The gentrification of Walmart

On Walmart’s most recent earnings call, executives described a value proposition so powerful it literally altered store architecture. “We reduced our incredible, very big lot box of croissants that are fresh-baked in club by $1, from $5.98 to $4.98, and the volume doubled,” said Chris Nicholas, President and CEO of Walmart’s Sam’s Club division. “We had to remove the shelf that we put them on because the volume that we were selling was so huge.”

It's just a pastry anecdote, sure, but the larger story isn’t bargain croissants. It’s the kind of shopper that Sam’s Club — and Walmart itself — now appeals to. On the call, executives touted not just “incredible assortment” but “incredible experiences,” a striking evolution for a retailer once defined almost exclusively by price. “Upper- and middle-income households are driving our growth,” CEO Doug McMillon told analysts. “We continue to benefit from higher-income families choosing to shop with us more often.” Meanwhile, he noted carefully, ”lower-income families have been under additional pressure.” They're still buying at Walmart, but contributing more to transactions than growth.

In this way, the croissant boom reveals Walmart’s new center of gravity — affluent yet value-focused households who want premium touches at smart prices. Call it gentrification by basket.

Redrawing the demographic map of American retail

For years, Walmart has hinted that higher-income households were joining its customer base at elevated rates. This year the shift became unmistakable. Roughly 75% of Walmart’s share gains now come from households earning more than $100,000 — a demographic that once treated the chain as a fallback, not a go-to destination. These shoppers are increasingly buying groceries there every week, signing up for Sam’s Club in growing numbers (with memberships rising 9% in the most recent quarter), and driving double-digit growth in pickup and delivery.

Quarterly category performance follows the same pattern. Fashion, home, automotive, and health-and-wellness all posted strong gains—the exact kind of categories that expand when financially comfortable shoppers broaden their shopping patterns. Online behavior underscored the trend, too, with toys, electronics, and apparel growing more than 40% year over year. Executives describe customers arriving with “a broader assortment” in mind and make clear the company is now catering to “a broader set of customers than we have historically.”

This broader set of customers translates directly into higher margins and greater profitability, which is a major reason executives sound so energized by the shift, declaring confidently that “this is the moment for a business like ours.”

How the K-shaped economy shops

Federal Reserve Chair Jerome Powell summed up America’s deepening wealth divide with unusual bluntness last week. “If you listen to the earnings reports for consumer-facing companies that deal with low- and moderate-income people, they’ll all say that we’re seeing people tightening their belts… changing products they buy, buying less,” he said. “It’s also clearly a thing that asset values — housing values and securities values — are high, and they tend to be owned by people at the higher end. Most of the consumption does happen by people who have more means. The top third accounts for way more than a third of the consumption.”

He's right, of course. Since 2020, U.S. homeowners have gained nearly $20 trillion in housing wealth, with the total market up close to 60%. Many of these same homeowners are still locked into 2-3% mortgages — cheap debt that allows for a kind of arbitrage at scale, with affluent American seeing their homes appreciate at 6-10% while their investment portfolios return more than 10%. Borrow at 3%, earn at 12%? The big fat spread becomes discretionary income. As the Wall Street Journal recently noted, for every $1,000 a household’s stock portfolio gains, they tend to spend $35 to $50 more — not because they cash out gains, but just because they feel wealthier.

The convergence of trade-down and trade-up

Now, increasingly, Walmart is capturing this asset-confident customer, the top third Powell highlighted carrying national consumption — and funneling billions of dollars of spending through big-box value retailers. The same trend has Costco’s most affluent members accounting for nearly 75% of its sales, too, a decades-long rise that has similarly reshaped everything from the company's store layout to product mix. Walmart and Sam’s Club now follow in its footsteps, with the fresh-baked croissant a perfect emblem of the change because it’s a small pleasure, at once extravagant and smart.

Today, where the rack holding up all those croissants once was, you’ll find a shopper in On sneakers and a Patagonia vest loading bargains into a cart they may never have expected to fill. They have assets, income, all in all a significant financial cushion, yet they're optimizing slightly downward — perhaps trading down from Whole Foods or Target. Walmart, meanwhile, is moving aggressively upward, elevating quality and experience to meet them halfway. It’s a convergence of affluent consumers seeking value and a discount retailer seeking affluence, meeting mid-aisle.

Walmart’s own stock chart reflects the same dynamic. Shares are up roughly 140% over the past five years, far outpacing the S&P 500’s 90% gain. As wealthier households shift more of their spending to Walmart’s ecosystem, investors treat the retailer itself as a promising bet. So Walmart hasn’t just benefited from the wealth effect—increasingly, it's one of the assets creating it.