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Due to the impact of rising food and fuel prices on consumer spending, US retail behemoth Walmart has issued a second profit warning since May.
According to the business, this year’s profits could drop by as much as 13%.
The unannounced announcement by Walmart “signals a warning bell for the retail sector,” one expert told the BBC.
During after-hours trading in New York, the company’s stock value plummeted by about 10%, while shares of rival shops Amazon and Target also experienced precipitous declines.
Prior to this, Walmart had stated that it anticipated a 1% decline in annual profit.
Doug McMillon, the company’s chief executive, said in a statement released on Monday after US markets closed that “the rising levels of food and fuel inflation are affecting how customers spend.”
The shop, he continued, “anticipates additional pressure on general merchandise in the latter half of the year” and, as a result, planned to lower the price of garments.
According to Neil Saunders, general director of retail at data analytics company GlobalData, consumers spend more of their income on necessities and reduce discretionary purchases as food and fuel prices rise.
Walmart is not alone
Several other stores may also be feeling the pinch, according to Mr. Saunders, who said that Walmart’s warning might be indicative. Despite having more purchasing power than most companies, he claimed, Walmart. Today’s statement demonstrates that even the strongest are not immune to growing prices. This helps it combat inflation to some extent.
The price of Amazon’s Prime service for UK consumers was increased on Monday for the first time since 2014 due to “increasing inflation and operating costs,” according to the online retailer giant. Streaming entertainment services are available with Prime, with limitless goods delivery.
The cost of food and gasoline are the main factors driving the fastest price growth in the US and UK in forty years.
The Ukraine conflict and the pandemic’s impact on the supply chain have increased consumer and business expenses.
Walmart stated it had more than $60 billion (£49.7 billion) in stock in its most recent earnings report in May and promised to make “aggressive” price reductions on a number of items.
Additionally, the business firstly reduced its profit forecast. Because of this, its stock had its largest one-day decline since 1987.
The second quarter profits from Walmart are expected to be released on August 16.