Walmart lowers its full-year profit forecast! It reveals several important signals

It is learned that according to CNBC, on July 25, Walmart lowered its quarterly and full-year profit guidance. After the news was released, Walmart's stock price fell, and the stock prices of other retailers including Target and Amazon also fell.

Walmart said it now expects adjusted earnings per share to fall about 8% to 9% in the second quarter and 11% to 13% for the full year. It had previously expected them to be flat or slightly up in the second quarter and down about 1% for the full year.

U.S. inflation is rising at the fastest pace in four years. As consumers face higher prices at gas pumps, grocery stores and restaurants, they are shifting spending. In some cases, they are prioritizing purchases they missed out on during the pandemic, such as splurging on vacations or eating out at restaurants.

Walmart said inflation is forcing consumers to spend more on food and less on items such as apparel and electronics, which carry far lower profits.

The shift in consumer spending has left more discretionary items unsold, forcing Walmart to slash prices to clear inventory. Chief Executive Officer Doug McMillon said deep price cuts on items such as apparel also hurt profit margins.

Walmart said it now expects second-quarter U.S. same-store sales to rise about 6%, excluding fuel, as customers buy more food at its stores, up from the company's previous forecast of 4% to 5% growth.

Doug McMillon noted that Walmart saw strong back-to-school sales in the United States, but expects people to buy fewer groceries in the second half of the year, which could threaten holiday shopping season sales.

The dramatic shift in consumer spending could also jeopardize other aspects of Walmart’s strategy, such as its subscription service Walmart+. Walmart has also launched a growing number of general merchandise brands, especially in apparel and home furnishings, which may now face liquidation as well.

However, Doug McMillon said Wal-Mart could gain market share and more customers' wallets in times of inflation by emphasizing lower discounts. In the past few quarters, he has emphasized that the discount store will keep prices low.

Walmart shares fell more than 9% after the market closed after it cut its profit forecast; Target fell more than 6%; Amazon fell more than 3%; Macy's, Kohl's and Nordstrom all fell more than 3% after the market closed as investors looked to exit stocks that primarily sell clothing and home goods.

Walmart will report its second-quarter results on August 16.

Editor✎ Ashley/

Disclaimer: This article is copyrighted and may not be reproduced without permission.