Claire Sinelli’s finances have gotten tight lately. The 29 year old and her husband made about $90,000 all together last year, but this year she’s doing an unpaid tattoo apprenticeship, so she’s been very strict about their grocery bill. When she does the shopping, she goes to multiple stores in order to get the cheapest price on everything, and she usually will place her order online for pickup, so that she sticks to her list and isn’t tempted to make impulse purchases.
“I will really meticulously look at everything on that order,” Sinelli said. “If there’s some things we can do without, I take them off.”
Her routine reflects more than personal discipline. With prices still elevated from inflation, companies beginning to pass off tariff costs to the consumer and wages failing to stretch as far as they used to, many middle-income families are now making similar calculations about where every dollar goes. In June, middle-income earners spent 2.5% less than their 2022 to 2024 average, according to data from the business intelligence company Morning Consult. A survey from the University of Michigan reported that consumer sentiment is near record lows.
But despite this, companies that have traditionally served middle and lower income shoppers, like Walmart and Dollar General, are still doing well. Economists’ warnings that tariffs would squeeze these businesses’ bottom lines haven’t panned out as dramatically as predicted, in part because higher-income shoppers have started trading down, boosting traffic and sales at the very retailers meant to serve more price-sensitive consumers.
In its most recent earnings statement, Walmart reported that its quarterly revenue rose 6% from the prior year to $179.5 billion, beating analysts’ expectations. Walmart’s net income was $6.1 billion or $0.77 per share, up by more than a third of last year’s net income of $4.6 billion or $0.57 per share.
In a call with analysts following the earnings report. Walmart CEO Doug McMillon said that upper and middle-income consumers drove the company’s growth this quarter. “We continue to benefit from higher-income families choosing to shop with us more often,” McMillon said. “Middle-income households have been steady, and while lower-income families have been under additional pressure of late, we’re encouraged by how our teams are meeting them with greater value across necessities.”
Karen Ziv is one of the high-income shoppers driving Walmart’s growth. She earns $178,000 a year from her remote job at a tech non-profit in San Francisco, which goes even farther where she lives in Chattanooga, Tennessee, a state with a low cost of living and no income tax. When she lived in Florida, Ziv did most of her grocery shopping at Publix, which she says is more expensive than Walmart. But when she moved to Tennessee, she says the previous stigma she felt about shopping at Walmart no longer applied.
“Moving to Tennessee, because of the cultural differences, because I hate to say, it’s such a red state, almost gave me permission to just shop at Walmart,” said Ziv.
Ziv said that while she has noticed her grocery bill going up from what it was when she first moved to Tennessee seven years ago, she doesn’t feel as though it affects her. “It used to go from thirty bucks a week to now the same amount of stuff is probably fifty or sixty,” Ziv said.
“I have so much disposable income that I can just absorb this,” she added.
Dollar General is doing well too, for similar reasons. The company reported that quarterly net sales rose 5.1% from the previous year to $10.7 billion, with profit up 3.8% to $411 million. CEO Todd Vasos said the company is seeing growth in the number of high and middle income earners shopping at Dollar General, and that despite worsening sentiment, the business is still seeing increased spending from its core customers. “Consumers across all income brackets are coming to Dollar General as they seek value,” Vasos said.
Meanwhile, Target, with a higher price point than that of Walmart or Dollar General, is struggling. The retailer reported that its quarterly profit fell 19% from the year before, to $689 million. Its revenue also fell 1.5% from the year before to $25.3 billion. “Guests are choiceful, stretching budgets and prioritizing value,” said Chief Commercial Officer Rick Gomez on the analyst call.
Even shoppers who are able to afford stores like Target still react to how much higher prices feel, and trade down as a result, said Priya Raghubir, a professor of marketing at New York University who studies consumer behavior.
“What you’re used to becomes a reference, and then you evaluate the [new] price presented to you in terms of that reference,” said Raghubir. “If it is higher, it’s a negative reference, which leads you to think twice before you decide to make that purchase and gets you to see if you could go to another store and get something cheaper.”
But that price awareness doesn’t mean shoppers have eliminated every nonessential. Raghubir says many lower-income consumers still make room for inexpensive little pick-me-ups, even as they trim their budget. “There will always be a market for small luxuries,” Raghubir said. “Even if I am hurting and I’ve increased the potatoes in my curry and reduced the meat…I’ll still have enough money to buy myself a little bunch of flowers or a lipstick, something which is not gonna break the bank, but will go a long way to making me feel less pinched.”
That desire for a small indulgence can end up steering shoppers toward different stores. Bethany Dillman, a mother of two in Oklahoma, said she used to browse Target for things like holiday décor. But her husband was laid off from his job in August, and while their family has savings to keep them afloat, they’re cutting back their spending.
Now Dillman goes to Dollar General, where the prices make those little extras feel doable. “They have just a much better price point for items that I would still like to buy,” said Dillman.
The same logic applies to necessities like clothing too. “Even though Target isn’t necessarily name brand, it’s like, why would I pay that much?” said Dillman.
“Why would I pay forty dollars for a sweater when I could get that for probably half the price at Walmart?”