Due to the 'Worst Inflation'... Walmart and Whirlpool Lowered Their Outlook for This Year (Comprehensive)

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] As the United States is experiencing its worst inflation in over 40 years, major retailer Walmart has lowered its earnings guidance for this year. The company anticipates a decline in profitability as sales of essentials like food increase while sales of apparel and electronics decrease. Other retailers such as Amazon and Target are also expected to face deteriorating earnings. The impact is spreading to other industries as well, with U.S. appliance maker Whirlpool lowering its outlook due to reduced demand.

According to CNBC and other sources on the 25th (local time), Walmart forecasted that its adjusted operating earnings per share for Q2 and the full year will decrease by 8-9% and 11-13%, respectively, compared to the same period last year. Previously, Walmart had expected Q2 operating earnings to remain similar to last year and an annual decline of about 1%.

The reason Walmart lowered its earnings outlook is the worst inflation in the U.S. in over 40 years. Walmart analyzed that as prices of essentials such as energy, including gas, and food have risen sharply, consumers are prioritizing these and cutting back on other spending. In fact, Walmart expects same-store sales (excluding fuel) in the U.S. to increase by 6% in Q2, revising upward from the previous estimate of 4-5% due to higher-than-expected food sales.

Doug McMillon, Walmart CEO, said, "The level of inflation in food and fuel is affecting consumer spending," adding, "We expect more pressure on general merchandise in the second half of this year." He also mentioned efforts to reduce inventory and that additional price cuts will be necessary to boost apparel sales in U.S. stores.

Generally, retailers earn more profit when selling apparel and electronics than essentials. The more essential goods are sold, the more Walmart’s profit outlook worsens. Following the downward revision announced after market close, Walmart’s stock price fell nearly 10% in after-hours trading. Walmart is scheduled to officially announce its Q2 earnings on the 16th of next month.

Concerns over worsening earnings at Walmart, a leader in the U.S. retail industry, mean other U.S. retailers cannot avoid the impact of inflation. Earlier, competitor Target also lowered its Q2 earnings outlook, stating that margin rates are inevitably being hit due to price reductions and canceled additional orders. After Walmart’s earnings announcement, Target’s stock price fell nearly 5% in after-hours trading, and Amazon’s stock, which is scheduled to announce earnings on the 28th, also dropped about 4%.

Due to inflationary pressures, major U.S. appliance maker Whirlpool also lowered its earnings outlook on the same day. It now expects operating earnings per share this year to be $22-$24 (approximately 29,000-31,000 KRW), about $2 lower than previously forecasted. Annual sales, initially expected to increase by 3% year-over-year, were revised to a 6% decrease. Jim Peters, Whirlpool CFO, told Bloomberg, "Demand is declining faster than initially expected," adding that demand is expected to remain suppressed through this year but sees a positive outlook in the mid-to-long term due to replacement demand for aging appliances.

Bloomberg reported that Whirlpool’s downward revision was less severe than market expectations. Accordingly, after the announcement post-market close, Whirlpool’s stock price rose nearly 2% in after-hours trading. After losing its position as the world’s top appliance maker to LG Electronics for the first time last year, Whirlpool has been struggling due to inflation and rising raw material costs.

Meanwhile, although there are concerns that the semiconductor market will freeze due to reduced demand for electronics including appliances, Dutch semiconductor company NXP Semiconductors expressed optimism, stating that demand for semiconductors used in automobiles and electronics will remain high. NXP Semiconductors forecasted Q3 sales of $3.35 billion to $3.5 billion, exceeding the market estimate of $3.32 billion. The gross margin is also expected to be 58.3%, surpassing the market expectation of 57.6%.

Kurt Sievers, CEO of NXP Semiconductors, said, "Despite the current macroeconomic environment, NXP Semiconductors will continue to perform well, and consumer demand in automotive, industrial, and Internet of Things (IoT) markets will continue to outpace supply." After the earnings announcement, NXP Semiconductors’ stock price fell more than 2% in after-hours trading.

This content was produced with the assistance of AI translation services.