Wal-Mart lowered its profit outlook on Monday, saying inflation is putting pressure on customers to reduce their purchases of miscellaneous goods and focus on necessities such as groceries.
Wal-Mart, the country’s largest retailer, said it expects full-year operating profit to decline by as much as 13% as it is forced to continue to mark down unsold inventories.
Another factor that narrows profits: Wal-Mart’s sales come mostly from the unprofitable grocery business, not from high-margin sectors such as electronics and clothing.
publicationCreated a few weeks before the company was set to report second-quarter earnings after the stock market closed, another thing that inflation is putting pressure on consumers and start-ups. It’s a sign. The Federal Reserve is preparing to announce the latest rate hikes this week to curb inflation. This has reached its highest level in 40 years.
Doug McMillon, Wal-Mart’s Chief Executive Officer, said: statement.
Wal-Mart’s share price plummeted by more than 9% in after-hours trading, after closing a normal trading day in the slightest deficit and then falling 0.1%. The share of other major retailers, including Target, also fell after business hours.
Retailers have been suffering from rising inventory levels since the spring when customers began withdrawing discretionary spending. Last month, target He also warned that lower inventory prices would reduce profits.
Initially, many companies believed that the shelves were flooded with goods due to delayed shipments due to delayed arrival of seasonal goods after demand diminished. However, it has become clear that consumers are retreating certain purchases as inflation, especially food and gas prices, has continued to rise since spring.
Retailer inventory problems have been followed by strong sales and profits for almost two years during a pandemic where consumers were flooded with government checks and loaded with electronics and home refurbishments.
Profit warning is a rare moment for Wal-Mart. Even before the pandemic, Wal-Mart was consistently increasing its profits by expanding its online presence and redesigning its store network.
Inventory problems faced by Wal-Mart and other retailers in recent months show how inflation seized the economy quickly and why the Federal Reserve is expected to act aggressively to curb it this week. I am.
“We have made progress in reducing inventory, controlling prices to reflect specific supply chain costs and inflation, and reducing storage costs associated with shipping container backlogs,” Wal-Mart said on Monday.
Despite inflationary pressure, Wal-Mart said it expects total sales to increase 6% in the second quarter. However, profits still declined as the company sold more food and other groceries.
According to the company, earnings per share in the second quarter are expected to decline by up to 13% and up to 8% for the full year.
