First-quarter earnings missed expectations as rising costs took a bite out of the bottom line, sending the stock to a sharp fall in premarket trading on Tuesday.
Walmart (Ticker: WMT) reported consistent earnings of $ 1.30 per share on revenue of 141.6 billion. Analysts had expected a profit of $ 1.48 per share on sales of 8 138.8 billion. Walmart’s U.S. comparative sales rose 3%, exceeding analysts’ estimates for 2.4% growth.
“The results below were unexpected and reflected an unusual environment,” said CEO Doug Macmillan. “The level of US inflation, in particular food and fuel, has put more pressure on margin blends and operating costs than we expected.”
The company also updated its guidelines to reflect higher supply chain costs and continued pressure from inflation. For FY 2023, Walmart expects aggregate net sales growth of 4% from the previous guideline of 3% growth. Comparative sales are expected to increase by about 3.5%.
Earnings per share, however, could fall by about 1%, or be flat compared to last year without a split. Operating income is also expected to decline by about 1% in fixed currency. The guidelines, issued in February, expected earnings per share to rise by a single-digit or 5% to 6%.
For the second quarter, earnings per share and earnings will be flat or slightly higher, while net sales could rise more than 5%, the company said.
Walmart stock fell 6.2% to $ 138.99 in pre-market trading on Tuesday. The stock has risen 2.4% this year.
Walmart’s earnings are particularly focused this earnings season, as investors are keen to get information on how low-income buyers are managing record inflation and to hear how retailers in general are shifting their spending to more services after buying in bulk. Of products during the epidemic.
In February, Walmart delivered an exaggerated fourth-quarter delivery, and provided commentary that fixed at least some nerves about consumer spending conditions, especially for its core low-income customers. More encouragingly, many retailers have followed the industry and earnings brackets, echoing Walmart’s results in their own strong fourth quarter, and in many cases, optimistic outlook for the whole year.
A lot has happened since Walmart’s last report. Most e-commerce companies have bad forecasts. Inflation has been rising for decades at a time when gas prices have risen above 2008 levels and Russia’s invasion of Ukraine has made essential items such as food more expensive. Geopolitical uncertainty is never good news for consumer confidence, which could be further shaken by headlines about rising interest rates and potential recessions.
Some worry that this could be a self-fulfilling prophecy, due to the fact that about 70% of the total domestic product in the US is tied to consumer spending.
Walmart is a belweather, not just because of its size, but because it serves a low-income population. They are of particular concern, as they are most affected by the spiral cost of essentials and may feel the loss of government stimulus most intensely.
Tuesday’s earnings could raise concerns among missed investors, even as top-line results were strong. Miss is not entirely surprising given the rising cost of doing business. Wholesale prices continue to move closer to historic highs in April, with the producer price index or PPI rising 11% year-on-year.
And indeed, comparing 2022 with the pre-epidemic 2019 level, complies with Placer.ai’s data Baron’s Shows that weekly visits to the quarter since April 18, last available, were generally about 2% to 3% less, not more than the fourth-quarter level. Furthermore, as a strong note, consumers may be able to buy more essentials at once, thanks to the one-stop nature of the store, which helps offset this fall.
What drives results will be equally important: Profits in low-margin areas like grocery stores may be less than the more discerning segments like clothing and electronics that buyers find easier to reduce, but no matter how high prices consumers are managing. The urging will be helpful for the essential.
Write to Teresa Rivas at [email protected]