Image source: Baking Business
Major US retailer Walmart has issued a profit warning for the second time since May due to the detrimental impact of rising food and fuel prices on customer spending.
The company estimates that it now expects this year’s profits to drop by 13%.
An analyst told the BBC that Walmart’s surprise action “signals a caution bell for the retail sector.”
The company’s stock value fell by about 10% in after-hours trading in New York, while shares of rival retailers Amazon and Target also saw sharp drops.
Walmart had announced that it expected its annual profit to drop by 1% this year.
Its chief executive Doug McMillon warned in a statement after US markets closed on Monday that “the growing levels of food and fuel inflation are affecting how customers spend.”
Because it “expected further pressure on general merchandise in the back half” of this year, the shop wanted to decrease garment expenses, he stated.
Not only Walmart
The general director of retail at data analytics firm GlobalData, Neil Saunders, claims that consumers have to spend a larger portion of their income on basics and have curtailed other purchases due to the increase in food and gasoline prices.
Mr. Saunders claims that Walmart’s warning indicates that countless other stores are also under pressure. He pointed out that Walmart has considerable purchasing power. This aids in reducing inflation to some extent, but today’s revelation shows that even the most powerful are vulnerable to price increases.
The price of Amazon’s Prime program for UK subscribers was hiked on Monday for the first time since 2014 due to “increasing inflation and operating costs.” Prime provides streaming entertainment services as well as unlimited merchandise delivery.
Prices in the US and UK are rising at their quickest rate in forty years as a result of rising gasoline and food costs.
The Ukraine war and supply chain issues caused by the epidemic have increased daily costs for both families and companies.
Walmart reported having more than $60 billion (£49.7 billion) in stock in its most recent earnings report and vowed to make “aggressive” price cuts on some items.
The company also lowered its earnings prediction for the first time.
As a result, its shares have fallen by the most in a single day since 1987.
Walmart is anticipated to announce its second-quarter profits on August 16.