Walmart, Inc. (NYSE: WMT), a multinational retail corporation and one of the biggest publicly listed companies on the US Stock Exchange has just released its 1st Quarter earnings report. In summary, it reported a mixed outcome. While its revenue and sales growth beat the Analysts’ estimates, its Earnings Per Share (EPS) missed the expectation, fueling a massive market sell-off following the official public disclosure.

Detailed Look

A significant determining ratio of the Company’s Investors, Earnings Per Share (EPS), has shown that it missed the estimated 1.48 EPS by 18 points, reporting an EPS of 1.30. The disappointing result overshadowed the Company’s positive results, including its total revenue, which rose to $141.57 billion from $138.31 billion in 2021, above consensus expectations of $138.94 billion. In addition, the Company’s Net Sales in the First Quarter is reported to be $140.29 billion, up by 2.3% from $137.16 billion in 2021. Lastly, Walmart’s global advertising business increased by more than 30% year-over-year (YoY).

Walmart disclosed that its profit margin had been negatively affected by unexpectedly higher inventory levels, the ongoing war in Ukraine, and the rising fuel crisis in Europe and North America, which increased the Company’s total fuel costs. The Company also attributed its low top-line growth to the adverse effects of “divestitures” and currency fluctuations across its global operation.

As a result, the Company’s stock, WMT, declined to $131.35, down by 11.4% in the trading session following the announcement. It has continued to decrease to Wednesday’s closing price of $122.43.

Reassurance From The Management

Doug McMillon, Walmart’s President and CEO, has reassured investors during the Company’s earnings call that the management has “taken steps to right things” and that the company “expects net sales to increase by around 4% in constant currency for the full year.” Nevertheless, he admitted that the business environment has changed, and so the Company reduced its profit expectations and gave a conservative estimate that its earnings per share for 2022 will go down by 1% compared to its earlier estimates.

Effect on the US economy

Walmart’s stock tumbled to its lowest price in a year. It puts other consumer stocks under higher selling pressure from market participants – both retail and institutional. Furthermore, Walmart heavily affects the outlook of its industry, being a major player and essential goods provider in the US. The long-term effect of the disappointing result of the Company is yet to be seen; however, it might trigger a sell-off on other consumer stocks that could negatively affect the US stock market and would, in turn, indirectly hurt the US economy.

The current economic environment of sustained high inflation and the supply chain issues across its stores globally have been putting much pressure on the American retail giant. Moreover, the expected lower consumer spending in the near future caused by Federal Reserve’s interest rate hike will prove to be an even greater challenge to the Company as it continues to trail the volatile situation it is in.