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Walmart said higher petrol prices were leading stressed consumers to ration purchases at the pump and warned of inflation in its store aisles as the retail behemoth confronts a rise in energy costs caused by the war in Iran.
Customers visiting Walmart’s US petrol stations are buying less than 10 gallons per visit for the first time since 2022, when Russia’s full-scale invasion of Ukraine had driven up oil prices. “That’s an indication of stress,” said John David Rainey, chief financial officer, on a call discussing quarterly results with analysts on Thursday.
The largest US retailer’s vast trucking fleet was not left unscathed, as higher fuel costs shaved 2.5 percentage points off the company’s operating profit growth in the three months to the end of April. The resulting rise of 5 per cent left operating income at $7.5bn, falling short of analyst estimates.
With thousands of stores and hundreds of millions of customers, Walmart offers a window into the health of the US consumer at a time when elevated petrol prices and resurgent inflation are bringing strain. Walmart again benefited in the quarter from shoppers seeking out its low prices, with comparable sales at its US division rising 4.1 per cent, beating estimates.
“When I look at the consumer, especially here in the US, they’re telling us they’re feeling some pressure and they’re looking to Walmart for value,” John Furner, chief executive, told analysts.
Walmart said it absorbed higher fuel expenses to keep prices down for customers, but warned that may not last.
“If the current elevated cost environment persists, we’d expect somewhat higher retail price inflation in Q2 and the second half of the year,” Rainey said.
Walmart shares dropped 7 per cent in morning trading, wiping about $72bn from its market capitalisation. Other retailers also fell, with Target off 1.7 per cent and Kroger down 2.6 per cent.
Even as drivers put less in the tank, Rainey said petrol stations at its US Sam’s Club warehouse chain were gaining traffic, with gallons sold up 12 per cent in May compared with an industry-wide decline in volumes.
Walmart’s revenue increased 7.3 per cent to $177.8bn, about $3bn more than estimates compiled by Visible Alpha. The results meant the company fell short of its goal of increasing operating profits at a faster rate than sales.
Offering fast home delivery to online shoppers is a competitive battleground with Amazon. Walmart’s ecommerce sales surged 26 per cent.
At Sam’s Club, which recently launched deliveries within an hour, deliveries from warehouses rose more than 90 per cent in the quarter. But Walmart also cited increased costs associated with these deliveries.
Walmart said it gained market share in both grocery and general merchandise. The latter category, which includes clothing and housewares, had its biggest share gains in five years. Rainey said larger tax refunds that came as a result of President Donald Trump’s signature tax law gave a tailwind to merchandise sales.
Walmart upheld previous guidance for net sales to rise between 3.5 and 4.5 per cent this fiscal year, and for its adjusted operating income to grow by 6 to 8 per cent, adjusted for exchange rates.
It forecast adjusted operating income would rise between 7 and 10 per cent in the second quarter, “leading us to wonder” if Walmart was planning to raise prices, BNP Paribas said.
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