Walmart cuts profit outlook as fuel, labour costs bite

Firm’s shares fall over 8% in intra-day trade

Walmart cut its full-year profit forecast on Tuesday, signaling a bigger knock to the retail giant’s profit margins from surging costs of everything from fuel to labor.

Shares of the retailer fell over 8 per cent in intra-daytrade, its biggest one day percentage drop since March 2020. Walmart has fared better than most rivals in maintaining inventory levels due to its massive scale and negotiating power with suppliers, but costs have soared as it expedited shipments and chartered cargo ships to get products on shelves.

An increase in wage costs led to operating expenses as a percentage of net sales rising by 45 basis points in the first quarter, Walmart said. Net income attributable to the company slumped nearly 25 per cent to $2.05 billion in the three months ended April 30.

“US inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than we expected,” Chief Executive Officer Doug Mcmillon said.

The firm said it expects fiscal 2023 earnings per share to fall about 1 per cent, compared to its previous forecast of a midsingle digit increase.

Walmart also tempered its second-quarter earnings expectations. The firm now estimated earnings per share to be flat to up slightly, compared to a previous forecast of a low to mid-single digit increase.

Total revenue for the first quarter rose 2.4 per cent to $141.57 billion, beating analysts’ average estimate of $138.94 billion, according to IBES data from Refinitiv.

Walmart has averaged a 4.9 per cent increase in monthly visits since the start of 2022 compared to the same period in 2021, Placer.ai data showed, as its resistance to raising prices pulled in more price-conscious shoppers feeling the strain of persistent inflation. However, comparable transactions at its US business remained flat from a year earlier.