Walmart Earnings: Profits Dragged Down by Higher Costs for Food and Fuel

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Walmart, the nation’s largest retailer, is being hit hard by inflation. The company reported on Tuesday that its operating profits in the first three months of the year fell 23 percent from a year ago, an unexpectedly large drop which Walmart blamed on broadly higher costs, particularly in labor and fuel.

“Bottom line results were unexpected and reflect the unusual environment,” Walmart’s chief executive, Doug McMillon, said in a statement. “U.S. inflation levels, particularly in food and fuel, created more pressure on margin, mix and operating costs than we expected.”

The drop meant that for the first time in many years, Walmart did not meet Wall Street’s profit expectations, an ominous signal for other companies trying to navigate the current inflationary environment.

Walmart’s earnings of $1.30 per share in the quarter were lower than the $1.48 expected by many analysts.

The rare profit decline shows how inflation, which is running at a 40-year high in the United States, is rattling even a giant company like Walmart, which typically can use its size and scale to lower the costs of the goods that it sells.

For the full year, Walmart now expects that its operating profits will fall 1 percent — a major shift in guidance from February, when the company projected that it would be able to grow profits by 3 percent this year.

Even as operating profits fell, Walmart managed to increase sales with its global revenue, which rose 2.4 percent to $141.6 billion and was higher than expected. Its sales in the United States were up 3 percent.

Going forward, the company expects sales to climb 4 percent this year, which is higher than the 3 percent increase it expected in February, a sign that consumer spending remains strong. Some companies, like PepsiCo, have reported jumps in revenue because consumers have continued to buy their products even after large price increases. But inflation has come on faster than expected, making it difficult for many businesses to recalibrate.

“We’re adjusting,” Mr. McMillon said in the statement. “And will balance the needs of our customers for value with the need to deliver profit growth for our future.”

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