To speak very bluntly-- not only is it too bad, it's also idiotic. It isn't just who comes into the shop. It's the other people they talk to about the shop.
The class thing is going to vary from store to store because some are taught by the owner and then some aren't getting anything from hiring an outside teacher and DO depend on purchases. However, in the social/free/whatever each shop calls those open, just come by and knit times-- to say that someone isn't welcome if they don't use the shop's yarn and needles is crazy. I have a friend who has an art class business and she is very free with advice and anyone can call her for information about not only her classes, but art in general. She constantly gets calls from people who say they heard about how friendly and helpful she is and want to sign up for her classes-- which are always full.
At my LYS, not only are you welcome to bring anything to the social knitting times, but the owner provides coffee and free advice for anyone there. And I discovered from experience that if you don't sign up early, there will be no room in her classes, they are always packed. I always overhear customers coming in to buy, who say, "so and so told me about you and said you'd help me find the right shade of orange for this sweater" and walk out with enough yarn for 3 sweaters, hundreds of dollars.
It's a shame about this particular LYS owner, Dot-- there was an LYS in the next town over and she had that attitude and went out of business in less than a year.