Image Source: Baking Business
As rising food and fuel prices have a negative impact on consumer spending, US retail behemoth Walmart has issued a second profit warning since May.
According to the company, it now anticipates a 13 percent decline in profits for this year. Walmart’s unexpected decision “signals a caution bell for the retail sector,” one expert told the BBC.
The company’s stock market value plummeted by about 10% in after-hours trading in New York, while shares of competing retailers Amazon and Target also experienced precipitous declines. Walmart originally predicted that its annual profit would only decline by 1% this year.
Its chief executive Doug McMillon said in a statement on Monday after US markets closed that “the rising levels of food and fuel inflation are affecting how customers spend.”
He continued by saying that the store intended to lower the cost of apparel since it “anticipated additional pressure on general products in the back half” of this year.
Walmart and other giants facing similar issues
According to Neil Saunders, general director of retail at data analytics company GlobalData, consumers are spending more of their income on necessities as food and fuel prices rise and have reduced their discretionary expenditures.
According to Mr. Saunders, Walmart’s warning shows that many other stores are also experiencing pressure. He said, even though Walmart has a lot of purchasing power. This aids in reducing inflation to some extent, but as today’s revelation demonstrates, even the most powerful are not immune to rising prices.
Amazon also upped the fee of its Prime program for UK subscribers for the first time since 2014 on Monday, citing “increasing inflation and operating costs.” Both merchandise deliveries and entertainment streaming services are unlimited with Prime.
Prices in the US and UK are rising at their quickest rate in forty years, primarily due to rising food and fuel prices.
The cost of living has increased for both consumers and companies as a result of the Ukraine war and supply chain problems brought on by the epidemic.
Walmart promised “dramatic” price cuts on some items in its most recent results statement in May, stating that it possessed more than $60 billion (£49.7 billion) worth of stock.
Additionally, for the first time, the corporation lowered its profit forecast. This caused its shares to see their largest one-day decline since 1987.
Walmart is expected to release its second-quarter financial results on August 16.
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