By Evie Liu
Even affluent households are feeling the squeeze. Recent sales figures from dollar stores and Walmart show that Americans of all stripes are turning to discount retailers for everything from food to household items.
It's the latest sign of an affordability crisis in the country. The annual inflation rate was 3% in September, still above the Federal Reserve's 2% target rate. Over the past five years, the cost of food at home has increased by more than 25%. The cost of other basic needs -- household items, utilities, transportation -- has also surged.
According to the Urban Institute's affordability tracker, the average cost of groceries increased by 32% between 2019 and 2025, while the average household income rose by only 29%. That means poorer households are spending a larger share of their budget on essentials.
Roughly half of Americans said it's harder to afford groceries now than a year ago, according to a survey by Axios and the Harris Poll. Another survey by retail consulting firm Dunnhumby showed that 28.5% of American consumers reported reducing their meal sizes or skipping meals due to economic hardship.
Sales at dollar stores have soared over the past year. The discount retailers are appealing to both lower-income shoppers struggling with tight budgets and more affluent consumers trading down.
Dollar Tree's net sales rose by 9.4% year over year to $4.7 billion in the third quarter, the company reported on Wednesday. The chain opened 106 new stores during the quarter, while same-store sales improved by 4.2%. Operating income also increased by 3.8% to $343 million.
"Lower-income households are depending on us more than ever," CEO Mike Creedon said on the earnings call, noting that the average spend for lower-income households grew more than twice as fast in the third quarter as that for higher-income households.
More people are going to the chain. About three million more households shopped at Dollar Tree stores during the third quarter compared to last year, according to the firm. About 60% of those new shoppers were from households earning more than $100,000 per year.
"Today, we serve an increasingly broad spectrum of shoppers, from core value-focused households to middle- and higher-income shoppers who are making deliberate choices about how and where they spend," said Creedon.
Dollar General is seeing something similar. On Thursday, the retailer posted 4.6% year-over-year sales growth for the quarter ended in October. Management pointed to an increase in the total customer count, with disproportionate growth coming from higher-income households.
Likewise, Walmart -- known for its value offerings -- also reported positive transaction counts and growing market share in grocery and general merchandise. While the firm has seen moderation in spending among lower-income families, it said more affluent households contributed to growth.
"We continue to benefit from higher-income families choosing to shop with us more often," said CEO Douglas McMillon.
Stock returns have been solid for this group, too. Dollar Tree is up 51% this year, while Dollar General has soared 65%. Walmart is 27% higher.
Write to Evie Liu at evie.liu@barrons.com
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December 04, 2025 16:04 ET (21:04 GMT)
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