Addressing maternal mental healthcare in AfricaRead more Qatar v. Ecuador to kick off FIFA World Cup 2022™ on 20 NovemberRead more Webb Fontaine Announces Launch of Niger National Single Window (NNSW) to Bolster TradeRead more Ethiopia: Loan from United Nations Fund Allows Food and Agriculture Organization (FAO) to Scale Up Fertilizers for Farmers in TigrayRead more How Choosing the Right Printer Helps Small Businesses and Content Creators to Save Time, Maximise Productivity and Achieve GrowthRead more The United States Contributes USD $223 Million to Help World Food Programme (WFP) Save Lives and Stave Off Severe Hunger in South SudanRead more Eritrea: World Breastfeeding WeekRead more Eritrean community festival in Scandinavian countriesRead more IOM: Uptick in Migrants Heading Home as World Rebounds from COVID-19Read more Network International & Infobip to offer WhatsApp for Business Banking Services to Financial Institution Clients across AfricaRead more

Walmart cuts profit outlook as inflation bites shoppers

show caption
Consumers are spending more on food, gasoline and other essentials at Walmart, which cut its profit outlook because of the weakened forecast for other goods that are more lucrative./AFP
Print Friendly and PDF

Jul 26, 2022 - 03:17 AM

NEW YORK — Walmart cut its profit outlook Monday as surging inflation prompts shoppers to cut back on higher-margin items as they contend with increased prices for gasoline, food and other staples.

The world’s biggest retailer now expects a double-digit decline in operating income for both the second quarter and full year after previously projecting the potential for a slight increase for the second quarter and a decrease of about one percent for the year.

Not all of the latest figures were downgrades to Walmart’s forecast, however.

The company now expects comparable sales growth of six percent for US stores in the second quarter, a slight upgrade from its prior outlook, reflecting heavy sales of food and consumables.

But this shift has come at the expense of other categories of merchandise, with the chain flagging apparel as a particularly weak domain in which it has cut prices to unload merchandise.

“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 US is requiring more markdown dollars,” said Chief Executive Doug McMillon.

“We’re now anticipating more pressure on general merchandise in the back half.”

Walmart’s announcement reflects the reality that profit margins for groceries are “far lower” compared with other goods, said analyst Neil Saunders of GlobalData Retail.

The big chain has dealt with higher labor and freight costs during the pandemic, but has “not passed these costs on in-full, which has an impact on its profitability,” Saunders said.

“We believe this is a trend playing out more widely: Most retailers are not struggling to grow their top lines, but they are struggling to maintain the high levels of profitability that were commonplace over the past few years.”

Shares of Walmart sank 8.8 percent to $120.38 in after-hours trading.

MAORANDCITIES.COM uses both Facebook and Disqus comment systems to make it easier for you to contribute. We encourage all readers to share their views on our articles and blog posts. All comments should be relevant to the topic. By posting, you agree to our Privacy Policy. We are committed to maintaining a lively but civil forum for discussion, so we ask you to avoid personal attacks, name-calling, foul language or other inappropriate behavior. Please keep your comments relevant and respectful. By leaving the ‘Post to Facebook’ box selected – when using Facebook comment system – your comment will be published to your Facebook profile in addition to the space below. If you encounter a comment that is abusive, click the “X” in the upper right corner of the Facebook comment box to report spam or abuse. You can also email us.