Rising prices are beginning to weigh on private consumption. But also on the results of the brands. And in the face of inflation, Walmart just cut its quarterly and annual earnings forecasts. An alarm signal for large retailers. Don’t worry, the Objeko editorial team will tell you all about it. Are you ready ?
Fighting inflation is not easy. And Walmart knows it. In fact, the world’s leading grocery retailer downgraded its quarterly and full-year earnings forecasts significantly on Monday. The reason? The inflationary context. It must be said that due to the increase in prices, customers are spending more on groceries and gasoline. At the same time doing without other goods with higher margins.
Walmart had already announced excessive levels of unsold inventory last month. He therefore did not hesitate to lower his prices to reduce his stocks. And of course, this will inevitably weigh on expected earnings for this quarter and fiscal year. The world market leader in food distribution is anticipating a decline in operating profit. A drop of around 13 to 14% in the second quarter of the fiscal year ended July.
It will not work
Private label expects consumers to continue adjusting their consumption habits. Indeed, customers should again limit their so-called non-essential purchases, especially clothing or household appliances: “Inflation in Europe is expected to remain high through the end of the year, which will weigh on consumer confidence and demand in the furniture and decoration sector“.
Carrefour shares fell on the Paris Stock Exchange (-0.59% to 16.87 euros). All in the wake of Walmart’s profit warning. However, the store has taken the time to recall its commitment to preserving consumer spending power. In particular, by offering a loyalty program to increase the competitiveness of the Group’s brands. So, does it work? We’ll see about that in a moment.
Carrefour is doing quite well
Here’s a Frenchman who can look an American giant straight in the eye. While Walmart panicked the markets by slashing its 2022 profitability projections, Carrefour, conversely, proved its ability to manage the impact of inflation on its accounts. And above all on the purchasing behavior of its customers. In the first six months of the year, sales increased by 5.4%. Most importantly, the current operating margin was kept at 2.1%. Not bad, right?