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Tuesday, July 26, 2022
Today's newsletter is by Myles Udland, senior markets editor at Yahoo Finance. Follow him on Twitter @MylesUdland and on LinkedIn.
Walmart (WMT) did it again on Monday.
After the market close, the company cut its second quarter outlook, saying earnings would miss expectations as the retail giant ramps up discounts amid a softening consumer outlook.
"The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars," CEO Doug McMillon said Monday. "We’re now anticipating more pressure on general merchandise in the back half [of the year]."
Back in May, Walmart and Target (TGT) sparked fears about the health of the consumer after both companies flagged bloated inventories and cautious customers.
And though the market's recent rally might suggest investors getting past these fears, the bad news from smaller brands like Bath & Body Works (BBWI) and Weber (WEBR) we've seen in recent days serve as a reminder — when retail giants sneeze, smaller players are going to catch a cold.
"Net Sales performance was affected by slower retail traffic, both in-store and online, in all key markets, as well as continued foreign currency devaluations that impact our reported results," Weber said in a press release Monday morning.
"Management believes that the slower retail traffic patterns are the result of pressured consumer shopping behaviors globally, due to rising inflation, supply chain constraints, fuel prices, and geopolitical uncertainty. The Company expects these market headwinds to continue into the fiscal fourth quarter of 2022."
In this release, Weber said sales for the most recent quarter would fall short of estimates.
And this, if you can believe it, was the good part.
Elsewhere, Weber announced they'd fired their CEO, suspended their dividend, withdrew guidance for next year, and said job cuts could be coming.
Shares fell 12% on Monday.
Last week, Bath & Body Works also cut its forecast for both its most recent quarter and the full-year 2022.
"Our business continues to perform at levels significantly above pre-pandemic, although we are navigating a challenging operating and macroeconomic environment with inflationary pressure affecting our customers and our business," the company's interim CEO Sarah Nash said in a release. "Our team is executing well, and our agility and clean inventory position allow the company to effectively adapt to changing consumer demand and preferences."
Sales are now expected to have dropped between 6%-7% in Q2; previously the company forecast a low-single digit decline. Bath & Body Works sales are also set to fall by mid to high single digits in 2022. Previously, the company saw sales rising over last year.
And the similarities between these companies goes even deeper than their consumer focus and macro commentary.
Bath & Body Works was spun out of the company formerly known as L Brands — which also housed Victoria's Secret — on August 3, 2021. On August 5, 2021, Weber made its public market debut. Both stocks have lost over 45% over that period.
And the last 50 or so weeks since these twin debuts have been among the most momentous we've seen in the global economy in some time.
Interest rates around the world are on the rise as inflation pressures become entrenched.
Supply chains continue to be stressed by COVID-related shutdowns and labor challenges.
A ground war has broken out in Europe.
Stocks are in a bear market.
Crypto winter has arrived.
And we still haven't figured out what "normal" is going to be in a post-pandemic economy.
On Thursday, the government is going to release its first look at second-quarter GDP. Some estimates suggest this will show the U.S. economy contracting for the second straight quarter, unofficially marking a recession.
But whether a recession is officially called or not doesn't really matter.
Bath & Body Works and Weber are just some of the companies out there walking and talking like recession is nigh, with recent comments showing us the biggest problem that surfaces in economic downturns — which is everything moving in the same direction at the same time.
And no one wants to blink first.
What to Watch Today
Economic calendar
9:00 a.m. ET: FHFA House Pricing Index, month-over-month, May (1.6% during prior month)
9:00 a.m. ET: FHFA House Pricing Index, year-over-year, May (18.8% during prior month)
9:00 a.m. ET: S&P CoreLogic Case-Shiller 20-City Composite, month-over-month, May (1.5% expected, 1.8% during prior month)
9:00 a.m. ET: S&P CoreLogic Case-Shiller 20-City Composite, year-over-year, May (20.6% expected, 21.1% during prior month)
9:00 a.m. ET: S&P CoreLogic Case-Shiller 20-City Composite, year-over-year, May (20.6% expected, 21.1% during prior month)
10:00 a.m. ET: Conference Board Consumer Confidence, July (97.2 expected, 98.7 during prior month)
10:00 a.m. ET: New Home Sales, month-over-month, June (10.7% during prior month)
10:00 a.m. ET: New Home Sales, June (660,000 expected, 696,000 during prior month)
10:00 a.m. ET: Richmond Manufacturing Index, July (-17 expected, -11 during prior month)
Earnings
Microsoft (MSFT), Alphabet (GOOGL), Coca-Cola (KO), McDonald’s (MCD), General Motors (GM), Chipotle Mexican Grill (CMG), Mondelez International (MDLZ), UPS (UPS), 3M (MMM), PulteGroup (PHM), Texas Instruments (TXN), General Electric (GE), Ameriprise Financial (AMP), Raytheon Technologies (RTX), Archer-Daniels-Midland (ADM), Chubb (CB), Canadian National Railway (CNI), Pentair (PNR), Paccar (PCAR), Kimberly-Clark (KMB), Albertsons (ACI), Teradyne (TER), Ashland (ASH), Boston Properties (BXP), FirstEnergy (FE), Visa (V)
Yahoo Finance Highlights
Walmart lays out plan to slash clothing prices across the board, shares tumble
Everything you need to know ahead of a crucial week for big tech
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