Walmart Earnings Are Dented by Higher Costs

As sales grew at the country’s largest retailer by revenue, “bottom-line results were unexpected and reflect the unusual environment,” said Walmart Chief Executive

Doug McMillon

in a release. Inflation created more pressure than the company expected on margins, particularly in food and fuel, he said. “We’re adjusting,” he said.

Net income fell nearly 25% from the same period last year to $2.05 billion. Adjusted earnings per share were $1.30, missing the consensus forecast from analysts of about $1.48, according to FactSet.

Overall revenue was up 2.4% to $141.57 billion.

Walmart said it expects U.S. comparable sales for the full year to grow about 3.5%, up from a previous estimate of 3%. It expects operating income to decrease about 1%, excluding currency fluctuations, down from a previous estimate of around a 3% increase.

Walmart’s stock fell more than 7% in premarket trading.

Early in the pandemic big-box retailers including Walmart benefited from a surge in spending for food and household goods, in many cases adjusting operations to offer more ways to buy online as some shoppers avoided stores. But a shift back to old buying behaviors, continued supply-chain disruptions and rising inflation have challenged some to keep sales and profits growing.

Walmart said Tuesday that sales of general merchandise slowed during the quarter, down by a low single-digit percentage, as consumers reduced spending on discretionary items without the benefit of government stimulus. Groceries typically have slimmer profit margins than general merchandise.

Inventory levels increased more than 33% in the quarter from the same period last year. That rise reflects the higher cost of goods due to inflation, the company said, along with Walmart’s choice to buy products aggressively amid supply-chain snarls and rising demand for some goods in past quarters. Product markdowns, when a retailer sells an item at a discount, were $100 million more than expected in the quarter.

Home-improvement products retailer

Home Depot Inc.

on Tuesday raised its outlook for sales and per-share earnings growth this year after reporting its first-quarter results, where higher average ticket prices helped offset a decline in customer transactions. Chief Executive

Ted Decker

said the company’s performance was notable even with a slower start to the spring season and the missing benefit of government stimulus that helped last year’s results.

Consumer spending has stayed robust through much of the pandemic as Covid-19-related stimulus programs boosted spending, wages rose and the labor market tightened. More recently inflation has dented some consumer spending, say some product manufacturers and retailers. In April, U.S. inflation edged down to an 8.3% annual rate, but remained close to the fastest pace in four decades. The decline came primarily from a slight easing in April gasoline prices, which have since reached a new high.

Economists are projecting that retail sales grew in April, but more of that spending shifted to services such as eating out at restaurants and entertainment, they said. Retail sales aren’t adjusted for inflation, which means sales can rise without consumers purchasing more items. The report on April retail sales is expected Tuesday morning.

Online buying behavior has shifted back to prepandemic levels, pressuring sales at online retailers such as

Wayfair Inc.

and

Amazon.com Inc.

Net sales within Amazon’s online stores segment—the company’s largest—fell 3% in the first quarter from a year earlier.

On Tuesday Walmart said U.S. e-commerce sales rose 1% in the most recent quarter, compared with a 37% increase in the same quarter last year.

Write to Sarah Nassauer at [email protected]

As sales grew at the country’s largest retailer by revenue, “bottom-line results were unexpected and reflect the unusual environment,” said Walmart Chief Executive

Doug McMillon

in a release. Inflation created more pressure than the company expected on margins, particularly in food and fuel, he said. “We’re adjusting,” he said.

Net income fell nearly 25% from the same period last year to $2.05 billion. Adjusted earnings per share were $1.30, missing the consensus forecast from analysts of about $1.48, according to FactSet.

Overall revenue was up 2.4% to $141.57 billion.

Walmart said it expects U.S. comparable sales for the full year to grow about 3.5%, up from a previous estimate of 3%. It expects operating income to decrease about 1%, excluding currency fluctuations, down from a previous estimate of around a 3% increase.

Walmart’s stock fell more than 7% in premarket trading.

Early in the pandemic big-box retailers including Walmart benefited from a surge in spending for food and household goods, in many cases adjusting operations to offer more ways to buy online as some shoppers avoided stores. But a shift back to old buying behaviors, continued supply-chain disruptions and rising inflation have challenged some to keep sales and profits growing.

Walmart said Tuesday that sales of general merchandise slowed during the quarter, down by a low single-digit percentage, as consumers reduced spending on discretionary items without the benefit of government stimulus. Groceries typically have slimmer profit margins than general merchandise.

Inventory levels increased more than 33% in the quarter from the same period last year. That rise reflects the higher cost of goods due to inflation, the company said, along with Walmart’s choice to buy products aggressively amid supply-chain snarls and rising demand for some goods in past quarters. Product markdowns, when a retailer sells an item at a discount, were $100 million more than expected in the quarter.

Home-improvement products retailer

Home Depot Inc.

on Tuesday raised its outlook for sales and per-share earnings growth this year after reporting its first-quarter results, where higher average ticket prices helped offset a decline in customer transactions. Chief Executive

Ted Decker

said the company’s performance was notable even with a slower start to the spring season and the missing benefit of government stimulus that helped last year’s results.

Consumer spending has stayed robust through much of the pandemic as Covid-19-related stimulus programs boosted spending, wages rose and the labor market tightened. More recently inflation has dented some consumer spending, say some product manufacturers and retailers. In April, U.S. inflation edged down to an 8.3% annual rate, but remained close to the fastest pace in four decades. The decline came primarily from a slight easing in April gasoline prices, which have since reached a new high.

Economists are projecting that retail sales grew in April, but more of that spending shifted to services such as eating out at restaurants and entertainment, they said. Retail sales aren’t adjusted for inflation, which means sales can rise without consumers purchasing more items. The report on April retail sales is expected Tuesday morning.

Online buying behavior has shifted back to prepandemic levels, pressuring sales at online retailers such as

Wayfair Inc.

and

Amazon.com Inc.

Net sales within Amazon’s online stores segment—the company’s largest—fell 3% in the first quarter from a year earlier.

On Tuesday Walmart said U.S. e-commerce sales rose 1% in the most recent quarter, compared with a 37% increase in the same quarter last year.

Write to Sarah Nassauer at [email protected]