Walmart Tumbles After Cutting Full-Year Profit Outlook

(Bloomberg) — Walmart Inc. cut its annual profit outlook for the second time this year, citing the need to lower prices to clear out bloated inventories.

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Adjusted earnings per share will fall as much 13% in the current fiscal year as US consumers shift spending to necessities amid soaring inflation, Walmart said in a statement Monday. Two months ago, the company had said earnings per share would only dip about 1%.

Walmart is following rival Target Corp. in cutting its profit forecast again as retailers contend with higher costs and stockpiles of unwanted merchandise. The highest inflation in four decades is forcing consumers to prioritize spending on groceries while shying away from big-ticket items, Walmart said.

“The increasing levels of food and fuel inflation are affecting how customers spend,” Chief Executive Officer Doug McMillon said in a statement. “We’re now anticipating more pressure on general merchandise in the back half” of the year.

Walmart shares slid as much as 9.2% in late trading to $119.81. The stock had dropped 8.8% this year through today’s close. Shares of Target Corp., Inc. and Costco Wholesale Corp. also declined.

Operating income will fall 13% to 14% for the quarter and 11% to 13% for the full year, Walmart said. Comparable US sales, excluding fuel, are expected to rise about 6% for the second quarter, which Walmart said was higher than it had expected.

Guidance cuts are emerging as the painful consequence of building up inventories after years of supply-chain constraints and booming demand. Now that life is returning to normal — even if the pandemic hasn’t gone away — retailers are increasingly stuck with stockpiles of unwanted merchandise amid unpredictable swings of demand.

(An earlier version of this story corrected the forecast cut.)

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