Walmart Misses First Fiscal Quarter Earnings, Stock Down 

Inflation, inventory, and supply chain challenges are creating the perfect storm and impacting profits.

Walmart-Misses-First-Fiscal-Quarter-Earnings-Stock-Down 
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The largest retailer in the U.S. reported missed earnings last week for the first fiscal quarter of 2022. As a result, Walmart has lowered its guidance for the remainder of the year insofar as profit expectations go, but raised its sales outlook, forecasting net sales to grow by 4 percent for 2022. The company had previously predicted a 3 percent increase. Walmart said that it anticipates its earnings per share for 2022 will be around 1 percent lower compared to the mid-single-digit increase it had forecast at an earlier date.

Like many retailers across the nation, Walmart has experienced the cost impacts of higher fuel prices, more inventory, and increasing its staffing levels.

Doug McMillon, Walmart’s Chief Executive Officer, said the results of his company’s bottom line “were unexpected and reflect the unusual environment.” McMillon was referring to the nation’s record-high inflation going back 40 years.

The company missed analysts’ expectations by a much wider margin than anyone anticipated, and as a result, Walmart’s shares were more than 12 percent lower by midday Tuesday. Many economists and analysts look to the mega-retailer as a benchmark of how Americans are weathering inflation. The retailer has had a 52-week low of $132.64.

The retailer has said much of its seasonal merchandise, including pool chemicals, grills, and plants, arrived too late and didn’t sell as expected. Many of the stores’ employees also returned to work quicker than anticipated, creating an overstaffing problem for the quarter. Since then, the retailer has resolved the issue.

For the first quarter ending on April 30, Walmart reported earnings per share of $1.30 adjusted. Analysts had expected $1.48 per share. The company’s revenue reached $141.57 billion versus the $138.94 billion predicted. The retailer’s net income for the first quarter dropped to $2.05 billion, or 74 cents a share. One year ago, the company had $2.73 billion in net income, or 97 cents a share. Walmarts adjusted earnings were reported as $1.30 a share for the quarter, short by 18 cents per share that was predicted.

The company’s adjusted earnings don’t factor in losses and gains on Walmart’s equity investments, nor does it include incremental losses from the company’s Japan operations or U.K. sale, which both occurred last year during the first fiscal quarter.

Walmart’s same-store sales also increased by 3 percent year-to-year, while e-commerce sales increased by 1 percent. Walmart’s Sam’s Club stores also saw their same-store sales go up by 10.2 percent year-to-year.

The retailer is reporting more sales on low-margin food items such as bread and eggs and fewer sales on higher profit margin items like electronics and apparel.

Walmart has been aggressive about buying items ahead of time due to stock concerns and inflation woes. The company took preemptive measures, but many merchandise items stayed in warehouses or arrived too late. As a result, it has created an overstock problem for the Bentonville, Arkansas-based retailer.

During the first quarter, the company initiated more markdowns and rollbacks, particularly on apparel merchandise.

As the weather continues to warm up, McMillon said Walmart should begin to sell more warm-weather inventory.

On Monday, Walmart shares closed at $148.21. As of  4:47 p.m. EDT on Tuesday, Walmart shares stood at 131.35 and were 16.86 lower, or down by 11.38 percent. By the close of trading on Friday, shares were lower still at 119.20 per share.

According to the Bureau of Labor Statistics, the U.S. consumer price index was higher by 8.3 percent last month compared to last year at the same time. The index broadly measures the prices of goods and services.

 

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