6 minute read
Summary: Walmart April '22-Quarter Results
Why were the results disappointing?
Walmart profitability struggled during the quarter due to temporary issues like overstaffing and a fire that destroyed a large eCommerce fulfillment center.
In addition, Walmart’s consumers started to shift spend from general merchandise categories to food categories because of inflation, and the company faced higher costs associated with supply chain and fuel.
Unlike Amazon, which indicated it was not seeing much change with consumer demand in the inflationary environment, Walmart very much is seeing changing behavior depending on the category.
Perhaps more importantly, management reduced its full-year outlook for operating income while raising its topline guidance. Profit is expected to be challenged as the company works through elevated general merchandise via rollbacks (expecting to do so over the next two quarters). It is also seeing its lower-to-middle income consumers trade-down in certain food categories.
In other words, Walmart continues to manage through a volatile period AND it’s seeing a negative consumer reaction to inflationary pressures, putting pressure on the retail sector generally. CPG brands exposed to private label will be most at risk in the coming quarters, and general merchandise suppliers are likely to have already seen order reductions.
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