Inflation, supply chain take bite out of Walmart Q1 profit

Walmart reported stronger sales for its fiscal first quarter, but its profit took a beating as the nation’s largest retailer grappled with surging inflation on food and fuel and higher costs from a snarled global supply chain.

The company — one of Ohio’s largest employers — also on Tuesday cut its fullyear earnings forecast, sending shares down more than 8% in early trading.

Walmart Inc., based in Bentonville, Arkansas, is among the first major retailers to report quarterly results and is considered a crucial barometer of spending given its size and the breadth of its customer base.

Like many big box retailers, Walmart benefited in the early days of the pandemic as shoppers splurged on food and other necessities, particularly online. But shoppers are resuming to pre-pandemic behaviors like pulling back their spending online and going back to physical stores. And supply chain clogs and surging inflation are presenting challenges for Walmart and other retailers.

Walmart executives told analysts on a conference call Tuesday that while some shoppers bought high-ticket items like game consoles and patio furniture in the latest quarter, others were switching to private brands from national brands, particularly in lunch meats, as they juggled higher costs. Walmart also confirmed that shoppers are also buying smaller half-gallons of milk, down from gallon jugs.

Meanwhile, Home Depot, the nation’s largest home improvement retailers, said on Tuesday that first-quarter sales improved despite a slow spring start, and it raised its full-year guidance. Still, quarterly sales grew at the slowest pace in two years, noted Neil Saunders, managing director of GlobalData,

The pair of earnings reports came as the government reported that U.S. retail sales rose 0.9% in April, a solid increase that underscores Americans’ ability to keep ramping up spending even as inflation persists at nearly a 40-year high.