The stock price for the world’s second-largest retailer, Walmart, fell by 11 percent on Tuesday, May 17, after the company reported lower-than-expected earnings in the first quarter — its worst single-session decline since 1987 — as rising costs for food, fuel and wages weighed on profits.
While Walmart’s revenue was up 3 percent in Q1, rising inflation put pressure on the retail giant’s profit margins, which were down 25 percent compared with a year earlier. This is testing Walmart’s appetite to raise prices, Bloomberg reported.
Built on a foundation of discounted prices, Walmart has been able to weather recessions in the past.
However, Walmart CFO Brett Biggs told analysts during the retailer’s first quarter earnings call on Tuesday that he was concerned that units per basket are dropping. Some consumers are trading down to smaller pack sizes, buying, for example, a half gallon of milk instead of a gallon, Biggs said, according to a Food Navigator report.
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To offset potentially tighter food margins, the company said it is planning to lower prices in other
areas including apparel, where margins are not as tight, in the hope of selling more things.
Walmart executives said during the earnings call that they were caught off guard by the degree to which shoppers pulled back in other categories to pay for food, Barron’s reported. Higher wages have helped Americans, but those gains haven’t been enough to offset inflation.
“Terrible sign for American families,” tweeted tae kim, a senior technology writer at Barron’s