Jul 25, 2022 - Economy

Walmart warns of lower profit as consumers shift spending

Hope King

man pushing a shopping cart out of a Walmart store — Customers exit a Walmart in Miami, Florida, U.S. Photo: Eva Marie Uzcategui/Bloomberg via Getty Images

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.

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Walmart warns of lower profit as consumers shift spending

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