Walmart misses Q1 earnings estimates because inflation weighs on profits

Walmart (WMT) reported mixed quarterly results on Tuesday, with earnings falling short of expectations as rising food, energy and wage costs weighed on profitability and even still-strong consumer spending helped boost sales. Shares fell more than 6% in pre-market transactions and fell about 9% after the market opened.

Here are the main metrics for Walmart’s first-quarter earnings report, compared to the consensus estimates compiled by Bloomberg:

  • Revenue: Expected, 141.57 billion vs. $ 139.09 billion, $ 138.31 billion Y / Y

  • Reasonable earnings per share: $ 1.30 vs. Expected 48 1.48, 1.69 Y / Y

  • Total US comparable sales excluding gas: + 4% vs. + 2.26% expected, + 6.2% Y / Y

Walmart, the largest retailer in the United States, has seen domestic sales decline from peak rates during the height of the epidemic, while growth in pantry-stocking and stimulus checks has helped boost results. Nevertheless, the company maintained revenue growth as demand for the company’s product array was resilient, even as consumer prices rose across the country. US comparable sales without gas – a closely watched metric of the company’s underlying sales trends – rose 4% as expected, and Walmart-only US comparable sales without gas rose the expected 3%.

However, rising prices weighed heavily on Walmart’s profitability, as the company’s earnings for the three-month period ending April 30 were lower than expected. Doug Macmillan, president and CEO of Walmart, noted the increased costs for both the company’s food and fuel. The main culprits.

“The results below were unexpected and reflected an unusual environment,” Macmillan said in a press statement. “The level of US inflation, especially in food and fuel, has put more pressure on margin blending and operating costs than we expected. We are adjusting and balancing our customers’ demand for price with the need to increase profits for our future.”

Walmart’s operating costs also rose 45 basis points quarterly as a percentage of net sales, “primarily due to rising wage costs in Walmart US,” the company added.

January 9, 2020 Mountain View / CA / USA - People shopping at a Walmart store in the South San Francisco Bay Area

January 9, 2020 Mountain View / CA / USA – People shopping at a Walmart store in the South San Francisco Bay Area

Walmart also indicated that it expected that many of these cost pressures would pull profits throughout the year. The company has downgraded its profit outlook and is now down about 1% on earnings per share for the full year, compared to the previous outlook for growth by mid-unit numbers.

And below Walmart’s estimated-topping revenue results for the first quarter, some individual sales divisions have posted even more bitter results. Comparable sales of general merchandise grew by only double-digit growth in the first quarter on a year-over-year basis, with Walmart citing “softening in the discretionary segments” as the company “lapped strong sales last year due to stimulus spending.” Comparative sales of intensive grocery stores also grew by less than double digits, although Walmart said it continued to gain market share in this segment compared to last year.

Moving on to Tuesday’s results, Walmart’s shares are performing well against year-to-date broad-based markets. Shares of Walmart have risen 2.4% so far in 2022, compared to a 15.9% drop in the S&P 500.

Emily McCormick is a reporter for Yahoo Finance. Follow him on Twitter.

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