Walmart’s profit warning is an unambiguous sign that rising prices are forcing regular Americans to change their habits. Investors in U.S. consumer stocks will be doing the same, writes johnsfoley:
. So after it said on Monday that it would miss its profit targets because customers are rethinking how to spend, the result is a widespread problem.
The house Sam Walton built says earnings per share for the year could fall 13% short of last year’s figure. That’s just over 80 cents less than analysts were expecting, according to Refinitiv, equivalent to around $2.3 billion in total. Walmart’s stock fell more than 10% after the market closed, erasing about $35 billion of market capitalization, in a clear indication that what’s at stake is more than just a fallow year.
Walmart has two issues, both bad for its profitability: the goods its customers no longer want, and the goods they actually do. Its warehouses are piled high with merchandise that inflation-pinched shoppers no longer desire, notably clothing. The company had some $61 billion of inventory at the end of April, compared with around $44 billion at the beginning of 2020.
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