A tale of two Ralphs illustrates a K-shaped economy

John and Theresa Anderson wandered into the spacious Ralph Lauren clothing store on Rodeo Drive to pick up holiday gifts.

They showed up with boxed blue bags. John designed quarter-zip sweaters for himself and his father-in-law, and his wife bought a tweed jacket for Christmas Day.

“I’m going to focus on quality over quantity this year,” said John, a clothing company executive and Palos Verdes Estates resident.

They visited the world-famous Beverly Hills shopping mall; there was little evidence of a major sale here.

Shoppers at a Ralphs grocery store in West Hollywood, a mile away bargain hunting. The chain’s website advertises discounts on a wide range of products, including wine and wrapping paper.

Massi Gharibian was looking for cream cheese and ways to save money.

“I’m buying less this year,” he said. “Everything is expensive.”

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The tale of the two Ralphs illustrates how Americans are experiencing radically different realities this holiday season. This represents the country’s K-shaped economy, a widening gap between the wealthy and those trying to stretch their budgets.

Some Los Angeles residents are tightening their belts and prioritizing necessities like food. Others frequent expensive stores Ralph LaurenWhere doormen hand out hot chocolate and cashmere-silk ties sell for $250.

People shop at Ralphs in West Hollywood.

(Juliana Yamada / Los Angeles Times)

In a K-shaped economy, high-income households are in the upper branch of the “K” and benefit from rising wages as well as the value of their stocks and property. At the same time, low-income families continue to trend downward, pressured by inflation and lackluster income gains.

The model reflects the country’s contradictions. Growth looks healthy on paper, but hiring has slowed and unemployment is rising. As investment in AI data centers soars, factories are laying off workers and home sales are stagnating.

This distinction is most visible in the area of ​​affordability. Inflation continues to be a much heavier burden on households with lower income distribution, and this frustration is reflected in politics. Voters are angry about expensive rents, groceries and imported goods.

“Lower-income people are becoming more conservative in their spending patterns, and upper-income people are actually increasing spending and spending more,” said Kevin Klowden, executive director of the economic think tank Milken Institute.

“Inflation pressures are much higher on low- and middle-income people, and that’s increasing,” he said.

According to a Bank of America report In the report published this month, after-tax wages for higher-income workers increased by 4% compared to last year, while lower-income groups saw an increase of just 1.4%. While the expenditures of high-income households increased by 2.6% compared to the previous year, low-income groups increased their expenditures by 0.6%.

Executives at the companies behind Two Ralphs say they’re seeing the trend across the country.

Ralph Lauren reported better than expected While it increased quarterly sales last month and raised its forecasts, grocery giant Kroger, which owns Ralphs and Food 4 Less, said it sometimes struggles to attract cash-strapped customers.

“We’re seeing a divide across income groups,” Kroger’s interim Chief Executive Officer Ron Sargent said in a company earnings call earlier this month. “Middle-income customers are feeling the increasing pressure. They’re taking smaller, more frequent trips and cutting back on discretionary purchases to manage their budgets.”

In West Hollywood, people are dropping off Ralphs with their food.

(Juliana Yamada / Los Angeles Times)

Kroger lowers full-year sales forecasts after mixed reporting third quarter profit this month.

On Ralph Lauren’s earnings call last month, CEO Patrice Louvet said his brand saw the benefit of targeting affluent customers and avoiding discounts.

“Demand remains healthy and our core consumer is resilient,” Louvet said, “especially as we continue to shift our hiring toward more full-price, less price-sensitive, higher basket-size new customers.”

Investors also noticed the split.

The stock charts of the companies behind the Two Ralphs also look similar to K. Ralph Lauren’s shares are up 37% in the last six months, while Kroger’s shares are down 13%.

To attract increasingly discerning consumers, Kroger offered a pre-cooked holiday meal for eight with turkey or ham, stuffing, green bean casserole, sweet potatoes, mashed potatoes, cranberries and gravy for about $11 per person.

“Extend your holiday money!” said the company’s weekly newspaper advertisement.

Signs advertising low prices hang at Ralphs.

(Juliana Yamada / Los Angeles Times)

At Ralph Lauren on Rodeo Drive, sunglasses and polo shirts were displayed without a discount. Twinkling lights adorned the trees at the store’s entrance, and employees offered free cookies to holiday shoppers.

Ralph Lauren and other luxury stores are taking the opposite approach to retailers selling basic products to the middle class.

They increase profits from sales of full-priced products. Stores that cater to high-end customers don’t offer promotions as often as they used to, said the Milken Institute’s Klowden.

“When luxury stores have sales, it’s often a larger structural symptom of how they’re doing,” he said. “They don’t need to sell right now.”

Upper-income earners are less affected by inflation, which raises prices of everyday goods, and are less likely to seek bargains, said Jerry Nickelsburg, faculty director of UCLA Anderson Forecasting.

“The lower end of the income distribution is being squeezed by inflation and less is being consumed,” he said. “There is increasing wealth and increasing income at the upper end of the income distribution, and so they are less affected, or even affected.”

The Andersons on Rodeo Drive also received gifts from Gucci and Dior.

“We’re spending about the same as last year,” John Anderson said.

Mel, a Beverly Grove resident at Ralphs who did not want to share her last name, said the grocery store needs to go above and beyond for its consumers.

“I’m trying to spend 100% less this year,” he said.