Rising fuel and food prices take their toll on Walmart | Economy

Walmart is the first retail company by turnover in the United States. The evolution of your business often serves as an x-ray of what is happening to the economy. The accounts for the first quarter of its fiscal year that it presented this Tuesday indicate that things are not going very well. Higher costs due to rising fuel and raw materials, higher labor loads and supply chain problems, that is, the same factors that have pushed inflation in the United States to its highest in 40 years, have forced the company to lower profit forecasts.

Walmart sells more and makes less. Inflation is also noticeable on the revenue side, which grew by 2.4% in the first three months of its fiscal year (from February to April) to 141,569 million dollars (about 134,500 million euros at current exchange rates). . The company, in fact, has raised its sales growth forecast for the year as a whole and now expects to earn 4% more.

The margins, however, deteriorate. Despite this growth in sales, profit fell from 2,730 to 2,054 million dollars, a drop of 25% in those three months compared to the same period in 2021. The company blames the increase in costs and thus disappoints the Wall Street investors. In addition, after this poor start to the year, the company expects a 1% drop in earnings per share for the year as a whole, compared to the previous forecast, which was around 5% growth.

In a release, Walmart President Doug McMilon notes, “We’ve had a strong quarter of revenue across all businesses. We thank our associates for their hard work and creativity. The final results were unexpected and are a consequence of the unusual environment. Inflation levels in the US, particularly in food and fuel, created more pressure on the margin mix and operating costs than we expected. We are adjusting and will balance the value needs of our customers with the need to increase profits for our future.”

The other bad news of the results appears in a presentation to analysts made by the company: cash generation was negative in the first quarter. The largest distribution group in the world went from generating an operating cash (cold and cold money due to the business) of 2,800 million in the first quarter of 2021 to losing or consuming 3,800 million in the first quarter of this year.

“The decline is primarily due to higher inventory costs and purchases to support strong sales, lower operating income and the timing of certain payments,” the company says. Free cash flow, which also takes into account investments, was even worse: negative by 7.3 billion, compared to 600 million generated a year ago.

He knows in depth all the sides of the coin.


Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Check Also
Back to top button