Walmart Profits Are Suddenly Falling, Here’s Why
Walmart's profits took a sudden and significant plunge.
This article is more than 2 years old
Retail giant Walmart seems like an unstoppable cash cow. The behemoth retail rakes in more money than is fathomable to the average person. Thus, it’s almost preposterous to think that such a lucrative entity could have any revenue woes. However, that could very well be the case. CNN reported that Walmart’s profits recently took a surprising plummet.
Walmart saw its latest revelation coming from a mile away. Walmart CEO Doug McMillon detailed in a news release that the rate of inflation’s market choking effects has a negative impact on the business’s overall revenue. Rising costs have forced consumers to rethink when and how they are spending their money. The grim news served to have an immediate effect on Walmart’s share prices. Following the disclosure, Walmart’s stock value dipped by a total of 7%.
The combined circumstances caused Walmart’s overall net worth to drop by 25%. Adding to the ominous outlook were Walmart’s predictions for the coming year ahead. Prior to inflation rearing its ugly head, the retailer has forecasted that it expected profits to grow by approximately 3%. However, after taking into consideration all of the external factors currently in play, Walmart is now asserting that it is actually expecting its profits to decrease by a margin of 1%.
Moreover, the company detailed that it also expects its overall revenue to take a hit due to the increased expenses that it predicts it will have to pay. This is further proof that no entity, even one as large and seemingly impenetrable as Walmart, is immune to inflation’s permeating effects. The retailer specifically cited that it predicts its monetary expenditures will increase predominantly for fuel.
Walmart’s predicted increased fuel expenditures align with the current state of the oil industry. Gas prices have skyrocketed not only domestically, but worldwide. Here in the United States, consumers are facing the exceedingly likely possibility of having to dole out $5 per gallon of gas. In fact, many states have already eclipsed that staggering figure.
Despite Walmart’s perceived challenges in the foreseeable future, the overall outlook for the company still looks promising. Even with inflation restricting spending, there are still shoppers out there willing to make purchases. This is especially true at stores, such as Walmart, that not only sell leisure items but also necessities. Moreover, the United States Labor Department recently detailed that despite all of the mitigating circumstances at play, retail spending is still up by almost 1%. In a tough market such as this, that is encouraging to see.
For Walmart, even though it looks like they might face a couple of rough patches ahead, compared to last year their revenue is still up. All and all, Walmart’s woes and the woes of other retailers like them are to be expected. They align with the natural ebbs and flows that the economy is tackling at present. What does remain in question, however, is just how bad inflation will get, how long it will remain, and when it finally does subside will the recipe for an all-out recession already have been made?
