(The Center Square) – Walmart has cut back its second quarter and full-year profit outlook as consumers focus more on necessary goods like food due to inflationary pressures.
As food prices increase, consumers have begun cutting back on spending on other goods to make purchasing consumable goods more affordable.
To combat high inflationary pressures, Walmart has marked down prices on other goods, especially apparel.
“The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hard-line categories, apparel in Walmart U.S. is requiring more markdown dollars,” said Doug McMillon, Walmart Inc. president and chief executive officer.
This announcement comes after the Bureau of Labor Statistics released its latest Consumer Price Index report, which showed a 9.1% price increase over the last 12 months. That’s the highest since 1981.
High inflation has affected consumers across the nation as families continue to live paycheck to paycheck, trying to make ends meet while dealing with increases across the board, especially gas, food, and home prices.
Food costs are above first quarter numbers and into double digits at 10.4%. The impact is less spending on nonessentials.
As consumers transition, Walmart expects its U.S. comparable store sales, excluding fuel, to increase by 6%, which is higher than previously expected. However, food has smaller profit margins than other, more durable goods.
Following the announcement, Walmart’s stock price fell, with its adjusted earnings per share expected to decline 8 percentage points to 9% for the second quarter and 11 percentage points to 13% for the full-year.
Walmart expects its second quarter and full-year operating income to decline 13 percentage points to 14% and 11 percentage points to 13%, respectively.
Remaining optimistic about the future, McMillon said Walmart expects consumers to increase their purchases of other more durable goods as the school year approaches, despite high inflationary pressures.
“We’re now anticipating more pressure on general merchandise in the back half,” McMillon said. “However, we’re encouraged by the start we’re seeing on school supplies in Walmart U.S.”