Walmart on Tuesday reported quarterly earnings that fell far short of Wall Street’s expectations as the nation’s largest retailer felt pressure from rising fuel costs and higher inventories.
Shares lost about 7% in premarket trading.
The company raised its revenue outlook for this year and said it expects full-year net sales to rise about 4% in constant currency. An increase of 3% had previously been expected.
But Walmart also lowered profit expectations. Earnings per share for the year will fall about 1% from the previously expected mid-single-digit increase, the company forecast.
In an interview with CNBC, Chief Financial Officer Brett Biggs said that significant increases in fuel prices, increased labor costs and aggressive inventory levels were weighing on the company. He said some goods were delayed and other items, such as grills, plants and pool chemicals, were not sold due to “unusually cool weather in the US.”
In addition, Walmart employees returned from Covid furlough faster than expected, causing the company to be overstaffed for part of the quarter. He said those planning challenges have been resolved.
The discounter’s final results “were unexpected and reflect the unusual environment,” CEO Doug McMillon said in a press release Tuesday morning. US inflation is at a nearly four-decade high.
“We are adapting and will balance our customers’ needs for value with the need to deliver earnings growth for our future,” he said in a press release.
Here’s what the discounter reported for the fiscal first quarter ended April 29, according to Refinitiv consensus estimates:
- Earnings per share: $1.30 adjusted versus $1.48 expected
- Revenue: $141.57 billion reported versus $138.94 billion expected
For the quarter, Walmart’s net income fell to $2.05 billion, or 74 cents a share, versus $2.73 billion, or 97 cents a share, a year ago. Excluding special items, the company earned $1.30 per share. That’s less than the $1.48 analysts were expecting, according to Refinitiv.
Total revenue increased to $141.57 billion from $138.31 billion last year Wall Street expectations are for $138.94 billion.
Same-store sales for Walmart US increased 3% compared to the prior-year period, or 9% on a two-year basis. E-commerce sales grew 1%, or 38%, on a two-year basis.
Walmart is a closely watched company as investors and economists look for clues as to how the American consumer is weathering inflation — and whether they’re starting to cut back on spending.
Inflation remains at a four-year high. The consumer price index, a broad measure of the prices of goods and services, rose 8.3% in April year on year, according to the Bureau of Labor Statistics.
Grocery, Walmart’s top selling category, is one of the hardest-hit categories. Food costs rose 9.4% on a 12-month basis in April, according to unadjusted data from the BLS.
As shoppers look for value, Walmart is gaining market share in the grocery store, Biggs said. Grocery sales, however, generate margins, as items like eggs and cereal make lower profits than durable goods like clothing and electronics.
Biggs said Walmart is seeing signs that some households are feeling their budgets are tight. For example, he said sales of half-gallons of milk and his own-brand lunchtime meats have skyrocketed.
“There are some signs of changing behavior among some customers due to inflation,” he said. “You certainly take note of the inflation.”
On the other hand, he said there is still demand for the latest gaming consoles and patio sets. He said the second quarter “started well from a sales perspective,” with the outdoor and apparel categories boosted by warmer spring weather.
Walmart shares closed at $148.21 on Monday. The stock is up about 2.5% so far this year, outperforming the broader market as investors look to consumer staples amid economic uncertainty. The company’s market capitalization is nearly $408 billion.
Read the company’s earnings announcement here.
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