Walmart has cut its outlook for the second quarter and the rest of the year, signalling a sharp worsening of the US retail environment as inflation bites the price-sensitive consumers on which the world’s largest retailer depends.
“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 Doug McMillon, Walmart’s chief executive officer.
Food inflation, running at a double-digit pace and higher than it was at the end of first quarter, was affecting customers’ ability to spend on general merchandise, the company said.
In a statement made after the close of New York trading on Monday and just three weeks before it is due to report earnings for the three months to June, Walmart said its operating income would fall by 13-14 per cent in the quarter and by 11-13 per cent over the full year.
At its last earnings announcement it had flagged that operating income would be “flat to up slightly” in the second quarter and down by only 1 per cent for the full year
“We’re now anticipating more pressure on general merchandise in the back half; however, we’re encouraged by the start we’re seeing on school supplies in Walmart US,” McMillon said.
Shares in the retailer fell 8.37 per cent after the market closed on Monday. In May, Walmart shares plunged 11.4 per cent in their biggest one-day drop since the eve of the Black Monday stock market crash after the company cut its earnings guidance.