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Walmart profit warning hammers retail stocks

07/26/2022 | 08:11am EDT
FILE PHOTO: Walmart's logo is seen outside one of the stores in Chicago

(Reuters) - U.S. retailers tumbled on Tuesday after a forecast cut from industry bellwether Walmart Inc stoked fears of similar warnings from a sector struggling with the impact of high inflation on consumer spending.

Online retailer Amazon dropped 3.4% in premarket trading, while Nike Inc fell 2.1%. Kroger, Best Buy, Costco, Target, TJX Companies and Home Depot shed between 2% and 5.4%.

Piper Sandler analysts said in a note they expect outlook downgrades across the retail space, with brands focused on lower- and middle-income consumers weakening the most.

Walmart's outlook provided "a diagnostic look at the average American household," showing that consumers are digesting higher prices of food and essentials by lowering spending on discretionary categories such as apparel, according to Jefferies analysts.

Walmart, the biggest private U.S. employer, said annual profit could fall by as much as 13%, adding that it would cut prices of clothing and general merchandise more aggressively to attract investors.

"Whether we are in or heading into an overall recession, it's going to feel like a recession in apparel," analysts at Citi Research said in a note.

Big box retailer Target, which lowered quarterly profit margin forecast in June and said it would offer deeper discounts to reflect weak demand, will report results next month.

Bucking the trend, Coca-Cola Co raised its full-year revenue and profit forecasts on Tuesday as demand for sugary sodas stayed strong despite price increases. McDonald's Corp also reported quarterly comparable sales above market expectations even as expenses soared.

(Reporting by Medha Singh in Bengaluru; Editing by Vinay Dwivedi)


© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
BEST BUY CO., INC. -1.61% 66.81 Delayed Quote.-34.24%
COSTCO WHOLESALE CORPORATION 0.45% 482.49 Delayed Quote.-15.01%
KROGER -1.97% 43.72 Delayed Quote.-3.40%
MCDONALD'S CORPORATION -1.82% 234.75 Delayed Quote.-12.43%
NIKE, INC. -1.02% 90.17 Delayed Quote.-45.90%
PIPER SANDLER COMPANIES -0.99% 113.39 Delayed Quote.-36.48%
THE HOME DEPOT, INC. 0.19% 290.39 Delayed Quote.-30.03%
THE TJX COMPANIES -1.08% 65.09 Delayed Quote.-14.27%
WALMART INC. -0.93% 131.68 Delayed Quote.-8.13%
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