Walmart revenue is affected by food inflation and staff spending

Country Largest retailer by revenue Sales increased in the most recent quarter, but higher production, supply chain and staff costs soaked in profits, drastically reducing retailer shares.

Throughout the epidemic, Walmart and other large box retailers have benefited High demand for many products And while some costs may increase, so does profit with sales. Walmart’s net income fell 25% year-on-year in the quarter ended April, down from analysts’ expectations.

“Something different happened on the quarter than we expected. We’re trying to be transparent about that, “said Doug McMillan, chief executive of Walmart.” “It simply came to our notice then. We are going to have a strong year to put it behind us.

Shares of Walmart fell more than 11% to $ 131 in Tuesday trading, although the stock performed better than the broader market this year. Compared to the S&P 500’s approximately 16% decline, the shares have risen about 2% to date before the earnings report.

The line between Amazon and Walmart is increasingly blurred as both companies seek to maintain a $ 5 trillion retail market while at the same time losing each other’s share by borrowing each other’s ideas. Photos: Amazon / Walmart

“We knew all the scary things about retail, and we thought Walmart might be a safe haven.

The company believes that Walmart’s profit struggles could represent broader challenges facing retail, but Plan to guide inflation It would be a safer place to invest compared to other retailers, he said.

To us Shopkeepers increased retail costs Inflation remained in April for the fourth consecutive month as inflation hit a four-decade high, according to government data released on Tuesday. Retail cost figures include restaurants, gas stations and car dealerships.

Higher food cost It prompted shoppers to change their spending Walmart executives said they were moving away from public goods and eating at a profit. Some consumers are still buying bigger tickets, they said, while sales of store-branded products are on the rise, a sign that other shoppers are trying to save money.

“We are helping a family that is below the income level to feed their families during this period of inflation,” Mr. Macmillan said. Walmart aims to reduce competitors in making more frequent purchases of things like bread, milk, canned tuna and protein, he said. “Since trigger checks happened last year, there have been some benefits for some who have been eroding over time.”

Even on Tuesday,

Home Depot Inc.

HD 1.68%

Despite the high cost of everything from home appliances to paint, consumers are still spending money on home renovations. The retailer said there were fewer shoppers in its stores to start the spring, but they spent more on one trip. Company Raised its profit and revenue projections Per year.

Walmart cited several expenses that made it profitable for the quarter.

As workers returned from the Govt-19 leave faster than expected, executives said in a call with investigators that Walmart had overstaffed its stores for several weeks. That problem was primarily solved by attrition. Macmillan said. As Walmart aims to keep prices lower than competitors in an inflationary environment, price increases are being fed into profits. Executives pointed out that some prices would rise and that negotiations with suppliers would help balance those costs.

Inventory levels also rose very fast, with executives blaming Walmart for putting more products on sale, executives said.

“We are not happy with the profit margins for the quarter, especially in the latter quarter. Macmillan said. Tuesday.

Inventory levels increased by 33% quarterly from the same quarter last year. That rise reflects higher commodity prices due to inflation, with supply-chain slips over the past quarter and increased demand for certain commodities, the company said, prompting Walmart to buy products more aggressively. When a retailer sells an item at a discount, the product marks down to $ 100 million more than expected for the quarter.

Chief Financial Officer Brett Pigs said supply chain spending has been higher than expected due to the war in Ukraine and the global development delays of Govt-19. “The supply chain did not return to normal as quickly as we thought,” he said.

Net income for the most recent quarter was $ 2.05 billion. According to FactSet, adjusted returns per share are $ 1.30, with analysts’ consensus forecast not $ 1.48. Total income rose 2.4% to $ 141.57 billion.

Sales of comparable sales, stores or digital channels in the US, which have been running for at least 12 months, rose 3% for the quarter ended April 29, driven by the strength of food items, the company said Tuesday. The number of U.S. transactions during the quarter was steady, while the amount spent each time rose 3%, the company said.

Walmart expects full-year U.S. comparable sales to increase by about 3.5% from the previous estimate of 3%. It expects operating income to fall by about 1%, excluding currency fluctuations, from the previous estimate of a 3% increase.

Online buying behavior has shifted back to pre-epidemic levels, pressing the sales of such online retailers.

Way Inc.

W 8.58%

And Inc.

AMZN 4.11%

On Tuesday, Walmart’s U.S. e-commerce sales rose 1% in the most recent quarter, compared with a 37% increase in the same quarter last year. Net sales in Amazon’s online stores segment — the company’s largest — fell 3% in the first quarter a year earlier.

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Write to Sarah Nassau at [email protected]

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