Walmart shares slide as inflation hits profits

Walmart's grocery and general merchandise segments saw low double-digit sales growth during the quarter

Walmart shares tumbled Tuesday after the company missed Wall Street expectations on quarterly profit for its fiscal first quarter. 

The retailer reported net income of $2.05 billion, or adjusted per-share earnings of $1.30. Total revenue came in at $141.6 billion, up 2.4% year over year. Analysts were expecting earnings per share of $1.48 and revenue of $138.9 billion. 

Ticker Security Last Change Change %
WMT WALMART INC. 125.13 +0.89 +0.72%

The company attributed the profit miss to higher wage expenses as declining omicron cases led to overstaffing, higher inventory and higher costs for shipping, storage, food and fuel due to inflation, which is currently running near a 40-year-high. 

"Bottom-line results were unexpected and reflect the unusual environment. U.S. inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than we expected," Walmart CEO Doug McMillon said in a statement. "We’re adjusting and will balance the needs of our customers for value with the need to deliver profit growth for our future."

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Walmart's U.S. comp sales for the quarter grew 3% year over year and U.S. e-commerce sales grew 1% year over year. The average ticket for U.S. customers climbed 3% year over year. 

Walmart's grocery and general merchandise segments saw low double-digit sales growth during the quarter, while health and wellness saw high single-digit sales growth. Inventory increased 33.4% during the quarter, reflecting a higher cost of goods due to inflation and increased inventory buys over the past few quarters. 

In the international segment, net sales fell 13% year over year to $23.8 billion. Net sales grew 10.4% year over year in Mexico and Central America, 7.2% annually in China and 6.9% year over year in Canada. 

Meanwhile, Sam’s Club net sales increased 17.5% year-over-year to $19.6 billion and comp sales increased 10.2% year over year.

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Looking ahead, Walmart is expecting a net sales increase of about 4% in constant currency for the year, but anticipates earnings per share will decrease about 1%. As for the second quarter, the retailer is forecasting a net sales increase over 5%, comparable sales growth of up to 5%, excluding fuel, and earnings per share growth that is flat to up slightly.