The inventory challenges that Walmart and other retailers have faced in recent months show how quickly inflation has gripped the economy and why the Federal Reserve is expected to act aggressively this week in trying to rein it in.
The profit warning is a rare moment for Walmart, which even before the pandemic had consistently been increasing its profits as it expanded its online presence and redesigned its store network. But, as inflation - particularly food and gas prices - has continued to climb since the spring, it has become clear that consumers are pulling back on certain purchases. Initially, many companies attributed the glut of goods on their shelves to shipping delays that caused seasonal items to arrive late, after demand for them had faded. Last month, Target also warned that its profits would be lower because of inventory markdowns. Retailers have been struggling with rising inventory levels since the spring, when customers began pulling back on discretionary spending. The shares of other major retailers, including Target, also fell after hours.
Walmart’s stock price plunged more than 9 percent in after-hours trading, after ending the regular trading day only slightly in the red, down 0.1 percent. is requiring more markdown dollars,” Walmart’s chief executive, Doug McMillon, said in a statement. “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.