Walmart confirmed that trading had got much tougher in recent months but not by as much as feared.
The US grocery giant reported a near 7% decline in operating income in the end-July 2022 quarter even though sales rose strongly.
Revenues in total rose by 8.4% to US$152.9bn helped by a 6.5% improvement in the US home market.
A shock profit warning last month had indicated that despite healthy sales margins were feeling the squeeze of rising inflation, slowing consumer spending and higher fuel costs.
So it proved, with second quarter operating income down 6.8% at US$6.8bn and gross margins 132 basis points (1.32%) lower due to markdowns, a change of the US sales mix and a stock charge at loyalty offshoot Sam’s Club.
Pre-tax profits rose by 12% to US$6.6bn, though for the half year were down 2% at US$9.45bn on sales up 5.3% at US$292bn.
Doug McMillon, chief executive, said: “The actions we’ve taken to improve inventory levels in the US, along with a heavier mix of sales in grocery put pressure on profit margin for Q2 and our outlook for the year.”
McMillon also pointed out that the retailer had attracted more customers during what he described as ‘this inflationary period’.
After the second quarter, operating income for the year is now expected to decline by 9-11%, which is an upgrade compared to previous expectations of an 11-13% drop.
Full-year adjusted earnings per share are also expected to decline by 9% to 11.%
Walmart now expects net sales to grow 4.5% with a currency headwind of US$2.1bn.