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Walmart Cuts Q2, FY Profit Outlook; Stock Down

Walmart Inc. (WMT) cut its profit outlook for the second-quarter and fiscal year 2023, saying that high food and fuel prices are hurting customer's ability to spend on general merchandise categories. The company anticipates more pressure on general merchandise in the back half.

".. Food inflation is double digits and higher than at the end of Q1. This is affecting customers' ability to spend on general merchandise categories and requiring more markdowns to move through the inventory, particularly apparel," the company said in a statement.

WMT closed Monday regular trading at $132.02 down $0.19 or 0.14%. In the after-hours trading, the stock further dropped $13.12 or 9.94%.

The Retail giant projects comp sales for Walmart U.S., excluding fuel, to be about 6% for the second quarter. It is higher than previously expected with a heavier mix of food and consumables, which is negatively affecting gross margin rate.

For the second quarter, the company now expects adjusted earnings per share to decline around 8% to 9%, operating income to decline 13% to 14% and consolidated net sales growth to be about 7.5%. Analysts polled by Thomson Reuters expect the company to report earnings of $1.81 per share and revenues of $148.25 billion for the second quarter. Analysts' estimates typically exclude special items. The company said in May that it expected earnings per share to be flat to up slightly, and consolidated net sales growth of 5%.

Net sales for the second-quarter included a headwind from currency of about $1 billion in the second quarter. Based on current exchange rates, the company expects a $1.8 billion headwind in the second half of the year.

The company maintained its expectations for Walmart U.S. comp sales growth, excluding fuel, of about 3% in the back half of the year.

Looking ahead for fiscal year 2023, the company now projects adjusted earnings per share to decline around 11% to 13%, operating income to decline 11% to 13%, and consolidated net sales growth to be about 4.5%.

Excluding divestitures, the company now anticipates adjusted earnings per share for the full year to decline 10% to 12%, operating income to decline 10% to 12% and consolidated net sales growth to be about 5.5%.

The company said in May that it projected annual earnings to decline about 1% and to be flat, excluding divestitures. It also expects consolidated net sales growth of 4 percent in constant currency and about 4.5% to 5%, excluding divestitures.

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