Walmart cuts profit forecast, blames food and fuel inflation
2022.07.26 00:57
FILE PHOTO: Shopping trolley is seen in front of Walmart logo in this illustration, July 24, 2022. REUTERS/Dado Ruvic/Illustration
NEW YORK (Reuters) -Walmart Inc on Monday cut its profit forecast as food and fuel inflation forced customers to limit purchases of other items, and the retailer responded by cutting prices of clothing and general merchandise.
Shares of the nation’s largest retailer were down 9% in trading after the bell, dragging down shares of rivals including Target (NYSE:TGT) and Amazon.com (NASDAQ:AMZN).
“The increasing levels of food and fuel inflation are affecting how customers spend … we’re now anticipating more pressure on general merchandise in the back half,” Doug McMillon, Walmart (NYSE:WMT)’s chief executive officer, said.
Consumers are responding to record high gas prices and spiking costs of food by cutting back on purchases of discretionary items, leading retailers including Walmart and Target to be saddled with mountains of inventory including apparel, home goods, appliances and kitchen ware.
In May, Walmart said it was sitting on over $60 billion of inventory at the end of the first quarter, 32% higher than last year.
Walmart on Monday said it was seeing double-digit inflation in food prices, which was higher than at the end of the last quarter and needed more price cuts to pare down excess inventories, particularly apparel.
The retailer estimates adjusted earnings per share for the second quarter to decline around 8% to 9% and full-year earnings to drop 11% to 13%. Excluding divestitures, full-year earnings per share are expected to drop 10% to 12%, the company said.
The company had previously forecast second-quarter profit to be flat to slightly up and full-year profit to decline about 1%.
Walmart raised its forecast for U.S. comparable sales, excluding fuel, to 6%, however, mainly to account for the rise in food prices. It previously expected those sales to be up 4% to 5%.
