Shares of Walmart Inc. sank 8% in after-hours trading Monday after the retail giant lowered its profit forecast, disclosing that inflation has required the company to conduct more markdowns.
The company now expects adjusted earnings per share to fall by 8% to 9% for the fiscal second quarter and 11% to 13% for the full year. Walmart’s WMT, -0.14% prior forecast called for earnings per share to be flat to up slightly during the second quarter and down 1% for the full year.
“Food inflation is double digits and higher than at the end of Q1,” the company stated in a release. “This is affecting customers’ ability to spend on general merchandise categories and requiring more markdowns to move through the inventory, particularly apparel.”
“The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hard-line categories, apparel in Walmart U.S. is requiring more markdown dollars. We’re now anticipating more pressure on general merchandise in the back half,” Chief Executive Doug McMillon said in a statement.
Walmart noted that it made progress during the quarter to cut back inventory levels by “managing prices to reflect certain supply chain costs and inflation, and reducing storage costs associated with a backlog of shipping containers.”
At the same time, Walmart said that it expects consolidated net sales to rise by 7.5% for the second quarter and 4.5% for the full year. Not including divestures, the company models roughly 5.5% in full-year growth.
The company anticipates a 6% increase in comparable-store sales in the second quarter, excluding fuel, a rate it says is higher than expected, though a greater mix of food and consumables is pressuring profits.
Walmart also expects to see an approximately $1 billion impact from foreign exchange in the second quarter.
Walmart shares have declined 16% over the past three months as the S&P 500 SPX, +0.13% has fallen 7%. The stock closed Monday with a 0.1% decline at $132.02