Cost of living: Walmart issues profit warning as price rises hit

Image credit: The Economic Times

Walmart, a major US retailer, has issued a profit warning for the second time since May as rising food and fuel prices have a negative impact on consumer spending.

Profits for this year are expected to fall by 13%, according to the company.

According to a specialist, Walmart’s unexpected move “signals a caution bell for the retail sector.”

In New York’s after-hours trading, the company’s stock value plummeted by about 10%, while shares of rival retailers Amazon and Target also experienced precipitous declines.

Walmart has previously stated that it anticipated a 1% decline in full-year profit this year.

After US markets closed on Monday, its chief executive, Doug McMillon, released a statement in which he stated that “the rising levels of food and fuel inflation are affecting how customers spend.”

The store, he continued, intended to lower apparel costs because it “anticipated additional pressure on general merchandise in the back half” of this year.

According to Neil Saunders, managing director of retail at data analytics company GlobalData, as food and fuel prices rise, consumers are being forced to spend a larger percentage of their income on necessities while reducing discretionary purchases.

According to Mr Saunders, Walmart’s warning signals that numerous other shops are also experiencing pressure.

“Walmart has unparalleled purchasing power. That helps it combat some inflation, but as today’s statement demonstrates, even the most powerful are susceptible to price increases,” he said.

Prime provides streaming entertainment services as well as unlimited merchandise delivery.

Due to rising food and fuel prices, prices in the US and UK are rising at their quickest rate in forty years.

Daily expenses for both homes and businesses have increased as a result of the Ukraine war and supply chain problems brought on by the epidemic.

In its most recent earnings report in May, Walmart stated that it had more than $60 billion in stock and promised to make “aggressive” price reductions on some items.

Additionally, the corporation reduced its profit forecast for the first time. Its shares experienced their largest one-day decline as a result since 1987.

On August 16, Walmart is expected to release its second-quarter earnings.

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