Walmart is concerned about the U.S. economic outlook this year after its latest earnings projections showed that consumers were under heavy pressure.
Shares of the retail giant rose 0.4 percent after the big-box retailer gave its weaker-than-expected outlook for the year ahead.
The world’s largest retailer saw its full-year earnings forecast (pdf) fall below estimates, as tight consumer spending due to high inflation, may lead to pressure on profit margins.
“The consumer is still very pressured,” Walmart CFO John David Rainey told CNBC.
“And if you look at economic indicators, balance sheets are running thinner and savings rates are declining relative to previous periods. And so that’s why we take a pretty cautious outlook on the rest of the year.”
Skyrocketing consumer, rental, and food prices are raising fears among investors that the Federal Reserve will continue to hike borrowing rates to slow the U.S. economy, which may lead to a recession by the end of 2023.
Last week Loretta Mester, president of the Federal Reserve Bank of Cleveland, said that more rate hikes may be necessary to cool down inflation.
Retail Giant Fends Off Price Hikes By Suppliers
The retailer continues to protect its customer base, by combating attempts by its product suppliers to hike prices.
“There’s still a lot of trepidation and uncertainty with the economic outlook. Balance sheets are continuing to get thinner, savings rate is roughly half of what it was at a pre-pandemic level and we’ve not been in a situation like this where the Fed is raising at the rate that it does,” Rainey told Reuters in a separate interview.
“So, that makes us cautious on the economic outlook because we simply don’t know what we don’t know,” the CFO added.
Meanwhile, Walmart CEO Doug McMillon, told investors on a post-earnings call, that he expects that “stubborn inflation” regarding dry goods, would have a “mixed” impact this year.
By Bryan Jung