Profit companies

Walmart warns of falling profits as consumers shift spending

Walmart, the world’s biggest retailer, now expects its second-quarter profit to be lower than previous estimates, saying the effects of inflation are having a ripple effect on customers.

Why is this important: Consumers have become more cautious about how they spend their money given high inflation. Companies are now readjusting their outlook and tightening their belts.

Driving the news: Walmart expects its adjusted earnings per share to fall about 8% to 9%, from a slight rise, the retailer reported Monday afternoon.

  • For the full year, the company expects a decline of 11% to 13%, versus a previously expected 1% decline.

What they say : Food inflation reduces consumers’ ability to spend on other types of goods, Walmart said in its statement.

  • As a result, inventories of items like apparel and electronics remain high, driving up the company’s container storage and shipping costs, and squeezing margins.
  • “[A]Walmart’s clothing in the United States requires more markdown dollars,” said Walmart President and CEO Doug McMillon.

The big picture: Consumers simultaneously shifted their spending towards going out, entertainment and other services.

What to watch: Debt levels.