The prosperity of Walmart’s grocery enterprise might be excessive.

Walmart has exceeded expectations this earnings season, with an early upward revision to full-year earnings forecasts. The company has successfully attracted upper-income households into their low-margin grocery stores, despite inflation leading to a decrease in discretionary spending. However, Walmart may face stiff competition from their rivals, such as Dollar General Corp. and Dollar Tree Inc. Target is also expanding its grocery offerings, with CEO Brian Cornell revealing the category grew by 61% from the first quarter of 2019 to the first quarter of this year.

Dollar General currently offers fresh produce in more than 3,200 stores, with plans to expand to 10,000 stores over the next few years, including a “substantial number” of stores within food deserts. Dollar Tree is also experimenting with a wider range of groceries in 2021. All three companies are undergoing renovations, adding new refrigerators and freezers to carry more perishables, and beefing up supply chains to keep grocery store shelves stocked. Walmart controls a quarter of the U.S. grocery market, but success can breed complacency. Dollar Tree and Dollar General have consistently ranked among the top five retailers where consumers shopped for groceries.

Despite its “dollar” nickname, Walmart beats most other companies when it comes to pricing, with the exception of Aldi. While Walmart is already promoting its own private labels and working with suppliers to keep prices down on processed foods and consumables, they will need to increase their focus on price leadership, according to CEO McMillon. Consumers will benefit from the growing interest in the grocery sector, but Walmart may face tough competition from their rivals who are increasing their market share and hiring former Walmart executives to their executive ranks.

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