NEW YORK (AP) – Walmart Inc. on Monday lowered its profit outlook for the second quarter and the full year, saying rising prices on food and gas are forcing shoppers to cut back on discretionary items, particularly clothing, that carry higher profit margins.
That behavior is forcing the nation’s largest retailer, based in Bentonville, Arkansas, to step up discounts on general merchandise items like home furnishings and electronics to move inventory.
Walmart’s shares fell nearly 10% in after-hours trading Monday.
Walmart’s move to lower its profit outlook in the middle of the quarter is rare and raised worries about how inflation, the highest in 40 years, is affecting the entire consumer sector. The stocks of many major retailers, including Target, Macy’s and Kohl’s, fell following Walmart’s Monday announcement. Several big consumer companies, including Amazon, McDonald’s and Procter & Gamble, are set to report their quarterly earnings results this week.
The warning follows reports by Walmart, Target and other retailers in May that a faster-than-expected shopper shift away from items that were popular in the height of the pandemic, such as casual clothing and home goods, left them with extra inventory they need to further discount.