Walmart lowers its profit prediction and blames it on food and gasoline costs

NEW YORK, 25 JULY – Walmart Inc (WMT.N) dropped its profit projection on Monday as rising food and gasoline costs pushed shoppers to restrict their purchases of other products, prompting the company to lower clothes and general merchandise prices.

Shares of the nation’s biggest retailer fell 9% in after-hours trading, pushing down competitors such as Target (TGT.N) and Amazon.com (AMZN.O).

“Increasing levels of food and fuel inflation are influencing how consumers spend… we’re now expecting additional pressure on general items in the second half,” said Walmart CEO Doug McMillon.

Consumers are cutting down on purchases of discretionary products in response to record high gas prices and rising food expenses, leaving merchants such as Walmart and Target with mountains of inventory including clothes, home goods, appliances, and kitchen equipment.

Walmart said in May that it had more than $60 billion in inventory at the end of the first quarter, which was 32% more than the previous year. more info
Walmart said on Monday that food price inflation was in the double digits, greater than at the end of the previous quarter, and that additional price cuts were required to reduce surplus inventory, notably clothes.

The company expects adjusted profits per share to fall by 8 percent to 9 percent in the second quarter and by 11 percent to 13 percent for the whole year. Excluding divestitures, the business expects full-year profits per share to decline by 10% to 12%.
The business had previously expected a flat to slightly higher second-quarter earnings and a 1% reduction in full-year profit.

Walmart boosted its projection for comparable sales in the United States, excluding fuel, to 6%, mostly to account for rising food costs. It had earlier predicted that sales would increase by 4% to 5%.

For more interesting business news, keep yourself updated here