On Monday, July 25, in the extended trading session, shares of Walmart (NYSE: WMT) dropped by 9.86% in after-hours trading, following a guidance cut caused by inventory issues and inflation concerns. The retail giant sees operating income declining in the second quarter and for the full year (FY) by 13% – 14% and 11% – 13%, respectively.
Furthermore, the firm said the operating margin will be about 4.2% for Q2 and 3.8% to 3.9% for FY 2023. CEO Doug McMillon sees inflationary forces affecting consumer spending, causing pressure on the store’s merchandise.
“The increasing levels of food and fuel inflation are affecting how customers spend. While we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars. We’re now anticipating more pressure on general merchandise in the back half; however, we’re encouraged by the start we’re seeing on school supplies in Walmart U.S.”
Finally, the guidance cut highlighted that customers are choosing Walmart to save money during inflation, which is reflected in the market share gains in the groceries category.
WMT chart and analysis
In the last month, WMT has been trading in a wide range between $119.89 and $133.39, with the long-term trend remaining negative as the shares are down 8.73% year-to-date (YTD).
With the after-hours move, the support line has moved to $118.29, and the resistance zone now ranges between $122.22 and $122.96.
TipRanks analysts rate the shares a strong buy, predicting that in the next 12 months, the average price the stock will reach is $155.10, 17.48% higher than the current trading price of $132.02.
With Walmart’s earnings report coming on August 16, the guidance cut seemingly spooked investors. Inflation is causing issues across the board for companies, with some pausing new hires while others are simply missing on earnings.
Despite all of this, the retail giant has a loyal customer base and should perform well in the long run; however, short term, the shares may see more volatility.
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