Walmart shares fall after the retailer reduces profit outlook due to inflation concerns
- Walmart pharmacy hours shares dropped after the company reduced its profit expectations. Inflation forces shoppers to spend more money on food and less on electronics.
- Doug McMillon, CEO, stated that aggressive markdowns on clothing items are also hurting margins.
- Walmart shares dropped, along with other retailers like Target and Amazon.
Walmart cut Monday’s full-year and quarterly profit guidance. It said that inflation was causing consumers to spend less on essentials like food and more on clothing and electronics.
This shift in spending has led to more products on shelves and warehouses, causing big-box retailers to aggressively markdown items customers don’t need.
At Tuesday’s open, the company’s stock dropped more than 8%. Other retailers like Target or ecommerce giant Amazon also saw shares fall.
Walmart stated that it expects adjusted earnings per share to fall by 8% to 9.9% for the second quarter and 11%-13% for the full year. They were previously expected to rise slightly in the second quarter, and then to fall by about 1% over the entire year.
Walmart the largest grocer in America
Walmart, the largest grocer in America and often considered a gauge for the economy’s health, reported that more people are shopping at its stores for food and groceries. They are choosing to skip over the essentials they don’t need.
Walmart stated that it expects U.S. same-store sales to increase by approximately 6% in the second quarter. This excludes fuel because customers are buying more food in its stores. This is more than the 4% to 5 percent increase the company had previously anticipated.
The company will be affected by the merchandise mix. Groceries are less profitable than other discretionary items like TVs and clothing.
“Increasing levels of fuel and food inflation are affecting how customers shop, and while we have made good progress clearing hardline category, Walmart U.S. apparel is requiring more markdown dollars,” Doug McMillon, CEO, stated in a press release.
Doug McMillon, CEO of Walmart
He stated that the company is experiencing strong back-to school sales in the U.S. but expects that people will reduce their general merchandise purchases in the second half. This could be a warning sign for retailers as they prepare for the holiday shopping season.
Walmart’s strategy could be affected by the sharp increase in consumer spending. Walmart+ is a subscription service that the company hopes to grow, but it could prove difficult for Americans to pay lower fees. It has launched an increasing number of general merchandise brands, especially in apparel and home. These could end up on the clearance rack.
SEE ALSO : y2mate
Walmart increase market share and customers
McMillon believes Walmart can increase market share and customers’ wallets in an inflationary period because it emphasizes good value. He has repeatedly stressed that the discounter will maintain low prices over the past few quarters.
Target also slashed its second quarter forecast. Last month, Target said that its profit margins would be affected by cancelling orders and marking down merchandise. Target attributed the revision to too many merchandise, including bulky home appliances that saw lower demand.
Walmart will announce its fiscal second quarter results on August 16.