US: US retail giant Walmart has warned about its profits for the second time since May, as food and fuel costs hit customers’ spending.
The company expects profits to fall by up to 13% this year. The firm’s stock market value dropped nearly 10% in after-hours trading in New York, while shares of rival retailers Amazon and Target also fell sharply.
Walmart expects its full-year profit to drop just 1% this year.
“Rising levels of food and fuel inflation are affecting the way customers spend,” its chief executive Doug McMillan said in a statement Monday after the US market closed.
He added that the retailer planned to cut clothing prices as it was “anticipating more pressure on general merchandise in the back half” this year.
As food and fuel prices rise, shoppers have to spend more of their income on essentials and have cut back on another spending, Neil Saunders, managing director of retail at data analytics firm GlobalData, told the BBC.
Mr Saunders said Walmart’s warning suggests that many other retailers also felt the squeeze.
“Walmart has buying power like few others. That helps it mitigate against some inflation, but as today’s announcement shows, even the mightiest are not immune to rising costs,” he said.
Also, on Monday, online retail giant Amazon raised the price of its Prime service for UK customers for the first time since 2014 because of “increased inflation and operating costs”. Prime offers unlimited delivery of products and entertainment streaming services.
Prices in the US and UK are rising at their fastest rate in four decades, driven by higher petrol and food costs.
The Ukraine war and supply chain issues caused by the pandemic have driven up everyday costs for households and businesses.
In its last earnings announcement in May, Walmart said it had more than $60bn (£49.7bn) worth of stock and pledged “aggressive” price cuts on some items.
The company also trimmed its profit outlook for the first time. That led to its shares suffering their most significant one-day drop since 1987.
Walmart is scheduled to publish its second-quarter earnings on 16 August.