Walmart reported stronger sales for its fiscal first quarter, but its profit took a beating as the nation's largest retailer grappled with surging inflation on food and fuel and higher costs from a snarled global supply chain.
The company also on Tuesday cut its full-year earnings forecast, sending shares down nearly 11.4% in trading on the New York Stock Exchange Tuesday.
Walmart Inc., based in Bentonville, Arkansas, is among the first major retailers to report quarterly results and is considered a crucial barometer of spending given its size and the breadth of its customer base.
Like many big box retailers, Walmart benefited in the early days of the pandemic as shoppers splurged on food and other necessities, particularly online. But shoppers are resuming to pre-pandemic behaviors like pulling back their spending online and going back to physical stores. And supply chain clogs and surging inflation are presenting challenges for Walmart and other retailers.
Walmart executives told analysts on a conference call Tuesday that while some shoppers bought high-ticket items like game consoles and patio furniture in the latest quarter, others were switching to private brands from national brands, particularly in lunch meats, as they juggled higher costs. Walmart also confirmed that shoppers are also buying smaller half-gallons of milk, down from gallon jugs.
Walmart reported earnings of $2.05 billion, or 74 cents per share. Adjusted earnings per share totaled $1.30, but that's still far short of the per-share earnings of $1.48 that Wall Street had expected, according to a survey by Zacks Investment Research. It also fell below last year's earnings of $2.73 billion, or 97 cents per share.
Higher labor and fuel costs as well as higher inventory levels dragged down the company's profits. Walmart said its employees returned from COVID leave faster than expected, resulting in the company being overstaffed for weeks during part of the quarter. Walmart said that it hired more workers at the end of the year to cover for those on leave. But scheduling challenges have been fixed.
Sales rose 2.4% to $141.57 billion, better than the $138.8 billion that analysts had projected.
"Bottom line results were unexpected and reflect the unusual environment," said CEO Doug McMillon. "U.S. inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than we expected."