Walmart Shares Plunge 9% on Q2 and 2023 Guidance Cut

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Walmart Inc. (NYSE:WMT) shares dropped nearly 9% after-hours Monday after the retailer cut its Q2 and full 2023-year guidance primarily due to pricing actions aimed to improve inventory levels at Walmart and Sam’s Club in the U.S. and mix of sales.

Consolidated net sales growth for the Q2 and 2023 is expected to be about 7.5% and 4.5% (about 5.5% excluding divestitures), respectively. Net sales include a headwind from the currency of about $1 billion in Q2. The company anticipates a $1.8 billion headwind in H2/23.

Operating income for Q2 and 2023 is expected to decline 13-14% and 11-13% (10 to 12% excluding divestitures), respectively. The operating margin is expected to be about 4.2% for Q2 and 3.8%-3.9% for 2023.

Adjusted EPS for Q2 and 2023 is expected to decline around 8-9% and 11-13% (10 to 12% excluding divestitures), respectively.

The increasing levels of food and fuel inflation are affecting customers’ ability to spend on general merchandise categories and requiring more markdowns to move through the inventory, particularly apparel. Q2 Comp sales for Walmart U.S., excluding fuel, are expected to be about 6%, higher than previously expected with a heavier mix of food and consumables, which is negatively affecting the gross margin rate. The company reiterated its expectations for Walmart U.S. comp sales growth, excluding fuel, of about 3% in H2/23.

The company is expected to provide further details on business performance and its outlook for the full 2023-year when it reports Q2 earnings results on Aug. 16.

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