Walmart feels toll on low-wage earners

Walmart reported stronger sales for the first quarter, but its profit took a beating as the nation’s largest retailer grappled with surging inflation on food and fuel and higher costs from a snarled global supply chain.

The company also on Tuesday cut its full-year earnings forecast, sending shares down nearly seven per cent before the opening bell. If that trend holds, it will be the biggest percentage decline in the company’s share price in more than two years.

Walmart reported earnings of $2.05 billion (U.S.), or 74 cents per share. Adjusted earnings per share was $1.30, but that’s still far short of the per-share earnings of $1.48 that Wall Street had expected, according to a survey by Zacks Investment Research. It also fell below last year’s earnings of $2.73 billion, or 97 cents per share.

Sales rose 2.4 per cent to $141.57, better than the $138.8 billion that analysts had projected.

“Bottom line results were unexpected and reflect the unusual environment,” said CEO Doug McMillon. “U.S. inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than we expected.”

The government reported last week that inflation eased slightly in April after months of relentless increases. Consumer prices jumped 8.3 per cent last month from a year ago, below the 8.5 per cent surge in March, but it remains very close to a four-decade high.

And there are sobering signs that inflation may be becoming more entrenched. Excluding the volatile food and energy categories, socalled core prices jumped twice as much from March to April as they did the previous month.

The increases were fuelled by spiking prices for airline tickets, hotel rooms and new cars. Apartment rental costs are also spiking.

Still, Walmart’s sales held up. The retailer tends to benefit in an inflationary environment as shoppers typically trade down to lowerprice stores.

Walmart, based in Bentonville, Ark., is among the first major retailers to report quarterly results and is considered a major barometer of spending given its size and the breadth of its customer base.