Walmart Cuts Profit Outlook as Inflation Keeps Shoppers at Bay

The retail giant said it is being forced to take deep price cuts to move its inventory, cutting into its margins.
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Walmart late Monday lowered its profit outlook for the second quarter and for all of 2023, saying that inflation is forcing it to slash prices so its cash-strapped shoppers will keep coming in, eating into its margins.

The move comes at the height of the normally bustling back-to-school season for the retailer.

The Bentonville, Arkansas-based retail giant said Monday it expected net sales growth of 7.5% for the second quarter and 4.5% for 2023, despite second quarter same-store sales growth of 6%, higher than previously expected.

Operating income for the second quarter and full year is expected to decline 13% to 14% and 11% to 13%, respectively, the retailer said. In May, Walmart said its operating income for the second quarter would remain flat or increase slightly.

The retailer blamed the situation on general merchandise price cuts taken at Walmart and Sam’s Club to improve inventory, as well as sales mix.

“Food inflation is double digits and higher than at the end of Q1,” Walmart said in a press release. “This is affecting customers’ ability to spend on general merchandise categories and requiring more markdowns to move through the inventory, particularly apparel … Customers are choosing Walmart to save money during this inflationary period, and this is reflected in the company’s continued market share gains in grocery.”

The company said it is maintaining its expectations for same-store sales growth, excluding fuel, of about 3% for the remainder of the year.

Share of Walmart fell more than 8% after hours Monday on the news.

“The increasing levels of food and fuel inflation are affecting how consumers spend, and while we’ve made good progress in clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars,” President and CEO Doug McMillon said in a statement. “We’re now anticipating more pressure on general merchandise in the back half; however, we’re encouraged by the start we’re seeing on school supplies in Walmart U.S.”






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