Walmart profits sink as inflation-slammed customers chop spending

0

Walmart shares are sinking after the retail chain told investors to expect lower profits for the rest of the year amid surging inflation.

The nation’s largest retailer reported that high costs for food are squeezing customers’ ability to spend on discretionary items, like furniture and electronics.

High prices for essentials are “affecting customers’ ability to spend on general merchandise categories and requiring more markdowns to move through the inventory, particularly apparel,” the Bentonville, Arkansas-based company said in a release Monday. The company said it would be cutting prices more on high-martin items, including clothing, to clear out inventory that had built up in the pandemic.

“The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars,” Doug McMillon, Walmart Inc. president and chief executive officer, said in the release.

McMillon said he foresaw more pricing pressure on general merchandise in the second half of the year, but was encouraged by early signs of back-to-school shopping.

The company’s U.S. division is expected to report comparable sales excluding fuel to be up 6%, higher than previously expected, but the mix is more heavily weighted toward lower-margin food and consumer basics. Walmart is slated to report quarterly results next month.

Walmart shares slump

The silver lining for Walmart: growing market share. 

“Customers are choosing Walmart to save money during this inflationary period, and this is reflected in the company’s continued market share gains in grocery,” the company said.

Walmart’s shares fell nearly 9% in after-hours trading Monday.

As a result, adjusted earnings per share for the second quarter and full year are expected to decline around 8% to 9% and 11% to 13%, respectively. Excluding divestitures, adjusted earnings per share for the full year is expected to decline 10% to 12%.

Adam Crisafulli of Vital Knowledge noted that other retailers including Target are facing similar problems.

“[D]irectionally this Walmart news shouldn’t shock anyone — we all knew retail was sitting on a mountain of inventory, which meant aggressive price cuts,” Crisafulli said in a report. “Target already came out on June 6 and slashed its guidance for FQ2 (for all the reasons being cited by Walmart) and investors should expect ugly margins/EPS from just about everyone.”

FOLLOW US ON GOOGLE NEWS

 

Read original article here

Denial of responsibility! Vigour Times is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – [email protected]. The content will be deleted within 24 hours.

Leave a comment
Enable Notifications    OK No thanks