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Walmart Cuts Outlook As High Fuel And Labor Costs Hit Profit Margins

Walmart Cuts Outlook As High Fuel And Labor Costs Hit Profit Margins

Walmart Cuts Outlook As High Fuel And Labor Costs Hit Profit Margins

After observing a sharp drop in profits, Walmart has cut its outlook, resulting from a decline in higher fuel and labor costs.

The news sent the company’s stock tumbling by 8% on Monday, marking the largest same-day drop the company has observed since March 2020. It also resulted in a decline in stock value of competitors such as Target, as Walmart’s market performance is often seen as a bellwether for the rest of the economy.

The company saw a 3% rise in same-store sales in the U.S. However, that came at the cost of slim profit margins as the company absorbed additional costs while it continued to offer low prices, Reuters reported.

Overall, the company saw its operating expenses increase by 45 bassos points as a percentage of net sales due to high labor costs and inventory challenges.

Walmart’s Chief Executive Officer Doug McMillon noted that the increasing inflation in the U.S., which is at a four-decade high, is also partly to blame.

While the rising inflation is leading some consumers to cut back on spending on essential items such as food and groceries, others continue to spend on discretionary items such as game consoles.

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