The shift in consumer spending also affects Walmart’s subscription service, Walmart+.
Amazon (NASDAQ: AMZN) shares plunged after retail company Walmart (NYSE: WMT) lowered its profit outlook due to inflation concerns. After trading closed on July 25th, Walmart cut its profit guidance for the quarter and full year as a result of inflation, resulting in a 4% stock price fall for Amazon. According to the retail company, inflation has affected customers’ shopping habits. It said people now buy more necessities like food rather than clothing, accessories, electronics, etc. The new spending habit has left some items on the shelves across many stores. Some products did not even make it to the stores as they remain in the warehouses. This has forced Walmart to mark down items that customers are spending less on or do not want.
Amid inflation worries, Walmart now execs adjusted earnings per share for Q2 to drop around 8% to 9%. The company expects adjusted earnings per share for the whole year to drop by 11% to 13%. Meanwhile, Walmart predicted earnings to be flat to slightly up in the second quarterly and a 1% loss for the full year.
The rising inflation is particularly affecting food and fuel and is growing at its fastest pace in 40 years. Walmart acknowledged that customers shop at its stores to fill their fridges and pantries. This signifies that many are more concerned about food than other general merchandise they can live without. CEO Dough McMillion wrote in a news release:
“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 US is requiring more markdown dollars.”
Rising Inflation Affects Amazon, Walmart, and Others
The shift in consumer spending also affects Walmart’s other strategies, including its subscription service, Walmart+. However, this may seem difficult with Americans cutting bills to buy more food and necessities. Walmart’s revised guidance came days ahead of Amazon’s Q2 earnings report on Thursday. Analysts are looking forward to how Amazon is managing through inflation pressure that has affected e-commerce company retail company Walmart. The rising inflation is affecting many companies, and it does not seem like Amazon can dodge the impact, just as Walmart could not.
As Amazon is down nearly 4%, Walmart is at a 9.94% loss, trading at $118.90 in extended trading hours. Walmart has fallen 8.76% since the year began and nearly 16% in the last three months. Similarly, Amazon has plunged 27.34% in its year-to-date record. In addition, the company has also dropped by 17.07% in the last three months.
After Walmart lowered its expectations due to inflation, the shares of Target (NYSE: TGT), Costco (NASDAQ: COST), and Nordstrom (NASDAQ: JWN) also fell after the bell as Amazon did.
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