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Walmart hints at economic struggle

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Walmart hints at economic struggle

Walmart (NYSE:WMT) traded sharply lower following the company’s second quarter results on Wednesday. Shares were down by more than 2.1% in early trading as a result of lackluster earnings and revenues during the quarter. The company reported disappointing quarterly sales and consequently blamed tightening wallets and rising fuel prices. Comparable same store sales in the U.S. slipped 0.3% in the second quarter, a stark miss in comparison to analyst consensus estimates. Analysts had expected same-store sales to gain 1% largely as a result of the strengthening economy.

Some traders and analysts alike are now questioning the true strength of the U.S. economy within middle and lower income regions. The nation’s largest retailer caters to those whom have less, not the higher end consumer. Much of the recent rise in household wealth can be attributed to the rise in stock values, not an improving employment market. Moreover, the real estate market in regions hardest hit during the 2008 financial crisis have yet to recover. The company’s Chief Financial Officer Charles Holley offered the street his take on the situation:

“The U.S. retail environment remains challenging, with virtually no inflation in food and higher payroll tax instituted earlier in the year. High fuel prices can impact spending as well. Our expectations for the back half of the year are through a lens of cautious consumer spending.”

Walmart reported earnings per share for the second quarter of $1.25 excluding-items, meeting estimates. However, the company fell short on the top line with revenue of $116.9 billion, less than the estimated $118.4 billion. Going forward, the company decided it needed to lower its guidance to reflect the changes in the economy. Walmart now expects a rise of only 2% to 3% for the year, down from the initial project of a 5% to 6% increase. The broad market averages are down more than 1.5% on the day as Walmart on just one of many large behemoths to disappoint the street.

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