Walmart (NYSE:WMT) shares are sinking after the giant retailer slashed its profit guidance. WMT stock is down 8% so far this morning on the news.
The company expects its earnings per share, excluding certain items, to drop about 8% to 9% year-over-year in the second quarter, versus its previous guidance for no change to a small increase. For all of 2022, the retailer now anticipates its EPS will sink 11% to 13%, compared with its previous guidance of a 1% decline.
Walmart explained sharply higher food costs have been negatively impacting consumers’ ability to buy other products. As a result, Walmart has had to reduce its prices in order to lower its inventories. One of the categories most significantly affected by the latter trend was apparel, the company reported.
The Positive Aspects of Walmart’s Q2 Results
The retailer announced its Q2 comparable sales had increased roughly 6% last quarter, excluding fuel. Previously, Walmart had predicted its Q2 comp sales would climb 4% to 5% excluding fuel. Meanwhile, the firm reported it was benefiting from “continued market share gains in grocery.”
“The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars,” said Walmart CEO Doug McMillon 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.”
An Analyst Made the Right Call on WMT Stock
Last week, Piper Sandler’s Edward Yruma predicted that Walmart would be hurt by inventory issues going forward. Warning that middle-class consumers were being hurt by inflation, the analyst resumed coverage of WMT stock with a “neutral” rating.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.