Cramer explains why budget retailers like Walmart are seeing success

CNBC’s Jim Cramer surveyed the consumer spending landscape Tuesday, explaining that budget outlets like Walmart offer a value proposition that attracts customers even though inflation continues to burden many in the U.S.

“Unless you can demonstrably show that your prices have come down, which is quite obvious from any trip to Walmart or Costco, or any perusal of any page at Amazon,” he said. “You won’t be able to generate the kind of numbers that can send your stock higher.”

The big box retailer posted an earnings and revenue beat on Tuesday, impressing Wall Street and sending the stock to a new 52-week high, up 3% by the close. Walmart highlighted growth in its e-commerce segment and advertising business as factors that contributed to its success.

But to Cramer, the main reason Walmart’s quarter impressed Wall Street is its affordable merchandise and price reductions. Walmart and peer retailers that focus on value — like Amazon and Costco — are what consumers want right now, and these retailers are some of the only ones that can afford large price rollbacks, he added. He reviewed consumer price index data from 2019 to the present day to analyze the scope of inflation, noting that over the past five years, costs for home furnishings, food, vehicle repair as well as movie and concert tickets rose by more than 20% in each segment.

Cramer continued, saying that the luxury buyer is “either gone, or, at the very least, gone into hibernation.” He pointed out that 75% of Walmart’s share gains during the quarter came from households earning more than $100,000. The company also said it currently has 6,000 rollbacks across all categories in its U.S. stores.

“There’s something going on underneath, something that’s hurting every department store, every dollar store, every mall store,” Cramer said. “There’s not enough value. There just isn’t.”

Walmart did not immediately respond to a request for comment.

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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Amazon and Costco.