Walmart stock tumbles as inflation hits profits

Walmart (WMT.US) stock plunged nearly 9% on Tuesday after a major US retailer recorded disappointing quarterly earnings and lowered its full-year financial outlook as rising prices of food, fuel and wages had a negative impact on the company's profits.

• Company earned $1.30 per share, falling 23% from the same period last year and well below analysts’ estimates of $1.48 cents as surging inflation offset the positive impact of higher sales;
• Revenue of $141.57 billion represents 2% increase from last year and topped analysts' estimates of $138.88 billion;
• "Bottom-line results were unexpected and reflect the unusual environment," Walmart CEO Doug McMillon said in a news release. "US inflation levels, particularly in food and fuel, created more pressure" than the company predicted;
• Despite higher prices, consumers are still spending, which was shown by today's US retail sales figures. US same-store sales rose 3% from last year, in-line with Wall Street estimates. However some analysts believe that Walmart was lifting prices too slow, which negatively affected profits;
• Company noticed that inflation affected shoppers' buying patterns. Rising number of clients moved towards private-label food brands — particularly in meat, deli items and dairy products and ditched discretionary items, the company said.
• Walmart, which normally benefits from a "value shift" in consumer sentiment given the lower price points of both its consumable and discretionary offerings, said higher-margin e-commerce sales were up only 1% from last year, but 38% on a so-called 'two year stack'.
• Walmart increased sales guidance for the year, but lowers profit expectations. In February company expected profit increase in the region of 3% this year, while currently company forecasts a 1% decrease. Net sales is expected to increase by around 4%, a 100 basis point boost compared to February forecasts.
• Walmart, America's largest retailer and employer, is treated by many analysts as an economic bellwether. Recent figures showed that inflation is affecting not only the tech sector but even retail behemoths like Amazon and Walmart. If current macroeconomic conditions do not improve soon, many of these cost pressures could remain a drag on profitability throughout the year.

Walmart (WMT.US) stock launched today's session with a massive bearish price gap and is heading towards local support at $132.50, where lows from February 2022 are located. The nearest resistance is located at $138.35 which coincides with 38.2% Fibonacci retracement of the upward wave launched in March 2020. Source: xStation5