Walmart has issued its second profit warning in less than three months, significantly lowering its annual forecast due to the impact of surging food and fuel costs on household budgets. The retail giant now expects its full-year profits to decline by as much as 13%, a sharp departure from its previous estimate of a mere 1% dip.
This announcement sent shockwaves through the financial markets, causing Walmart’s stock to plunge nearly 10% in after-hours trading and dragging down shares of competitors like Target and Amazon.
According to Chief Executive Doug McMillon, the persistent rise in essential costs is forcing customers to prioritize groceries over general merchandise. This shift has left Walmart with an oversupply of discretionary goods, leading the company to plan aggressive price cuts on items like clothing to clear inventory before the end of the year.
Industry analysts suggest that if a market leader with Walmart’s immense buying power is struggling to absorb these inflationary pressures, the rest of the retail sector is likely facing even deeper financial strain.
The broader retail landscape reflects these mounting costs, with Amazon recently increasing its Prime membership fees for the first time in years to offset rising operating expenses. Driven by global supply chain disruptions and the war in Ukraine, inflation rates in the US and UK have reached 40-year highs.
As Walmart prepares to release its full quarterly earnings in mid-August, its current struggles serve as a bellwether for a global economy where consumers are increasingly unable to afford non-essential goods.
