Walmart, the largest retailer in the world, now expects its profits from the second quarter to come in below previous estimates, saying the effects of inflation are having a ripple effect on customers.
Why it matters: Consumers have become more cautious about how they spend their money in light of high inflation. Companies are now readjusting their outlook and tightening their belts.
Driving the news: Walmart expects its adjusted earnings per share to decline around 8% to 9%, versus flat to up slightly, the retailer reported Monday afternoon.
- For the full year, the company expects a decline of 11% to 13%, down from a previously expected 1% drop.
What they're saying: Food inflation is cutting into consumers' ability to spend on other types of goods, Walmart said in its statement.
- As a result, inventories of things like clothing and electronics remain high and are pushing up the company's costs for storage and shipping containers — and driving down margins.
- "[A]pparel in Walmart U.S. is requiring more markdown dollars," Walmart president and CEO Doug McMillon said.
The big picture: Consumers have simultaneously shifted their spend toward going out, leisure and other services.
What to watch: Debt levels.