Walmart’s outlook remains tepid in the leadup to the world’s largest retailer’s second quarter earnings call on Tuesday August 16.
The US large-cap issued a profit warning in July as concerns over inflation, consumer spending and rising fuel prices continued to mount.
While inflation is expected to boost the top line, that will come at the expense of margins, particularly following a discounting campaign on certain lines to get rid of excess product, as well as a higher proportion of basket spend going towards lower-margin food items.
Russ Mould, investment director at AJ Bell, said: “Inflation is therefore both a boon and a curse for the retailer.
“Food-price inflation is running in the double-digits on a percentage basis, according to Walmart, but the need to discount to shift certain categories of other goods, notably general merchandise and clothing, is crimping margins, as are rising input costs.”
Consolidated net sales growth is expected to come in at 7.5%, impacted by a US1$bn currency headwind, while operating margins are expected to be around 4%.
Adjusted earnings per share for the second quarter is expected to decline between 8% and 9% for the second quarter.
Yet WMT shares are trending positively in the lead up to tomorrow’s earnings, having added 3.9% over the past five days.