Walmart on Monday cut its quarterly and full-year profit guidance, saying inflation is causing shoppers to spend more on necessities like food and less on items like clothing and electronics.
Shares of the company fell about 8% after hours. It also dragged down other retailers’ stocks, including Target, which was down by more than 5%. Amazon fell more than 3%. Macy’s, Kohl’s and Nordstrom each tumbled more than 3% after hours, as investors looked to get out of stocks that sell primarily apparel and home goods. Gap dropped around 2%.
Walmart said it now expects same-store sales in the U.S. to rise by about 6% in the second quarter, excluding fuel, as customers buy more groceries. That’s higher than the 4 to 5% increase that the company previously expected.
However, that merchandise mix will weigh on the company’s profits. Food has lower profit margins than discretionary items, such as TVs and clothing.
“The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars,” CEO Doug McMillon said in a news release.
He said the company is seeing strong back-to-school sales in the U.S., but anticipates people will pull back on buying general merchandise in the second half of the year.
Shares of the company fell about 8% after hours. It also dragged down other retailers’ stocks, including Target, which was down by more than 4%. Amazon fell more than 3%. Macy’s, Kohl’s and Nordstrom each tumbled more than 3% after hours, as investors looked to get out of stocks that sell primarily apparel and home goods. Gap dropped around 2%.
– CNBC’s Lauren Thomas contributed to this report.
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