Groceries take more of Walmart customers’ wallet share amid high food inflation, hurting gross margins

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Although Walmart Inc.’s WMT, +5.75% fiscal second-quarter results and outlook were much better than feared, with the discount retail behemoth’s stock surging 6.0% in morning trading, worries that high food inflation would continue to hurt sales of higher-margin general merchandise were realized. Overall gross margins contracted by 132 basis points (1.32 percentage points). Grocery sales were “strong” in the latest quarter, as the sales mix for the category increased nearly 300 basis points from a year ago, Chief Financial Officer John Rainey said on the post-earnings conference call with analysts. But that led to a more than 350 basis point decrease in general merchandise mix, resulting in additional price discounting in the category. “The rising costs for essential items and customers reprioritization of spending led to significant mix shifts in our business,” Rainey said, according to a FactSet transcript. Walmart’s stock was the best performer among Dow Jones Industrial Average DJIA, +0.59% components. The price gain of $7.93 added about 52 points to the Dow’s price, which was up 61 points, or 0.2%.

This article was originally published by Marketwatch.com. Read the original article here.

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