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Walmart Q1 earnings miss estimates as inflation weighs on profits

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Walmart (WMT) reported mixed quarterly results on Tuesday, with earnings falling short of estimates as rising costs for food, fuel and wages weighed on profitability even as still-solid consumer spending helped buoy sales. Shares fell 11.35% on Tuesday for the stock's worst single-session decline since 1987.

Here were the main metrics from Walmart's first-quarter earnings report, compared to consensus estimates compiled by Bloomberg:

  • Revenue: $141.57 billion vs. $139.09 billion expected, $138.31 billion Y/Y

  • Adjusted earnings per share: $1.30 vs. $1.48 expected, $1.69 Y/Y

  • Total U.S. comparable sales, excluding gas: +4% vs. +2.26% expected, +6.2% Y/Y

Walmart, the largest retailer in the U.S., has seen sales growth decelerate from a peak rate during the height of the pandemic domestically, when a surge in pantry-stocking and stimulus checks helped boost results. Still, the company has maintained revenue growth as demand remained resilient for the company's array of products, even as consumer prices have climbed across the country. U.S. comparable sales excluding gas — a closely watched metric of underlying sales trends at the company — grew by a greater-than-expected 4%, and Walmart-only U.S. comparable sales excluding gas also grew by a better-than-anticipated 3%.

However, rising prices have weighed on profitability for Walmart, as earnings fell short of estimates for the company's three-month period that ended April 30. Doug McMillon, Walmart's president and CEO, cited increased costs for both food and fuel at the company as some of the main culprits.

"Bottom-line results were unexpected and reflect the unusual environment," McMillion said in a press statement. "U.S. inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than we expected. We're adjusting and will balance the needs of our customers for value with the need to deliver profit growth for our future."

Walmart's operating expenses as a percentage of net sales also increased by 45 basis points during the quarter, "primarily due to increased wage costs in Walmart U.S.," the company added.

Jan 9, 2020 Mountain View / CA/ USA - People shopping at a Walmart store in south San Francisco bay area
Jan 9, 2020 Mountain View / CA/ USA - People shopping at a Walmart store in south San Francisco bay area

Walmart also signaled it expected many of these cost pressures would remain a drag on profitability throughout the year. The company cut its profit outlook and now sees a decrease of about 1% in earnings per share for the full year, compared to a prior outlook of an increase by mid-single digits.

And beneath Walmart's estimates-topping revenue results for the first quarter, some individual sales categories posted more tepid results. General merchandise comparable sales grew by just low double-digits on a year-over-year basis during the first quarter, with Walmart noting "softness in discretionary categories" came as the company "lapped strong sales last year due to stimulus spending." Closely watched grocery comparable sales were also up by low double-digits, though Walmart said it continued to see market share gains in the category over last year.

Heading into Tuesday's results, Walmart shares were outperforming against the broader market for the year-to-date. Walmart shares were up 2.4% so far in 2022 through Monday's close, compared to a 15.9% drop in the S&P 500.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.

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