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How Record Grocery Inflation Affects Costco, Walmart, Target

Retailers like Costco, Walmart, Target and Dollar General fortify when facing grocery inflation.
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When regular shoppers walk into a grocery store, higher prices are just the norm lately. It becomes second nature. And while frequent shoppers know they're paying more, some new research shows exactly how much.

Record grocery inflation has been reported by Numerator, including a high of +15.1% in June, almost double what it was at the beginning of the year. Beverages are seeing the impact of this inflation the most. Other products like frozen meat (+28%), milk & milk substitutes (+17%), poultry (+25%) and chips (+26%) are greatly affected by this inflation. How will this effect businesses and companies who thrive off of food and beverage consumption? 

Which Chains Benefit From Higher Prices

Businesses that tend to sell higher priced goods are less attractive to a buyer who is in need of cheap and quick items. When prices are higher, people on a budget (which is really most people) have a couple of options. They can trade down -- maybe get skirt steak instead of filet, Brawny paper towels instead of Bounty -- or they can shop someplace with cheaper prices.

This is where cheaper businesses come in. Grocery inflation is especially good for companies like Costco  (COST) , Walmart  (WMT) , Target  (TGT) , and Dollar General  (DG) . As prices continue to rise for beverages, companies with initiatives to sell cheaper items ooze optimism as consumers flock over. 

These chains may see more customers, but their stock prices have not all followed the same trajectory. Dollar General, for example, is up just over 4.48% year-to-date while Costco is down 14.48% (as of mid-day July 13 and year-to-date). Walmart (which owns Sam's Club) is down 14.31% and Target is down 38.17% (as of mid-day July 13 and year-to-date). 

Dollar General Announces New CEO

Dollar General image  DB

Dollar General Changes CEOs

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Amidst the retail upheaval, one very successful CEO has decided to call it quits.

Dollar General's CEO Todd Vasos plans to retire as of Nov. 1, 2022, according to a company statement. The position will then be given to Jeffery Owen, its current chief operating officer. 

Michael Calbert, chairman of DG's Board of Directors, shared his goodbyes to Vasos in the statement: "On behalf of the Board of Directors, I want to thank Todd for his many years of service to Dollar General, his outstanding leadership, commitment to our values and dedication to the Company, its employees, customers, communities and shareholders. Todd led Dollar General through a period of significant transformation, accelerated growth and innovation. We are a stronger, more resilient, and longer term strategically driven organization than when he took the reins in 2015. DG is a better company today as a result of Todd’s leadership.”

Vasos, however, will continue working as a consultant and board member on a two-year contract.

The chairman also welcomed Jeffery Owen: “The Board is looking forward to continuing this strong trajectory under the leadership of Jeff Owen, who is a strategic thinker, strong collaborator and proven leader known for his motivational leadership and deep knowledge of DG.”

The welcomed new CEO Jeffery Owen shared his excitement in the statement: "I am deeply honored to have the opportunity to build on Todd’s incredible tenure as CEO. I am equally humbled to lead Dollar General as we continue to serve our customers with value and convenience, support the communities we proudly call home and provide our employees with career and growth opportunities.”

Investors who find these companies attractive for its initiatives to market items in bulk for less money should watch as Dollar General, Costco, Walmart, Target, and others respond to grocery inflation, especially with the announcement of DG's new CEO Jeffery Owen.