Walmart is seeing a bifurcation in how its various consumers shop its stores as inflation takes its grip on wallets, explains CFO Brett Biggs.
The trend ranges from upper income households still buying name brand merchandise at higher prices, to lower income shoppers trading to cheaper private label products.
"We're seeing everything that's going on in the United States right now," Biggs told Yahoo Finance in an interview.
The comments come as Walmart had a surprising earnings shortfall for the first quarter as supply chain inflation weighed on profits. Walmart said Tuesday it also had to deal with higher-than-expected wage expenses due to the Omicron variant and inventory markdowns as consumers spending more cautiously.
Here is how Walmart performed compared to Wall Street estimates:
Revenue: $141.57 billion vs. $139.09 billion expected, $138.31 billion year over year
Adjusted earnings per share: $1.30 vs. $1.48 expected, $1.69 year over year
Total U.S. comparable sales, excluding gas: +4% vs. +2.26% expected, +6.2% Y/Y
The company lifted its full-year sales growth outlook to 4% from 3% back in February. But inflationary pressures and working through excess inventory clipped Walmart's profit outlook. The company sees earnings per share falling 1% this year compared to a prior outlook for a mid-single digit percentage increase.
Walmart shares fell 10% in afternoon trading. The company's ticker page was the most active on the Yahoo Finance platform.
"Transitory issues (labor, inventory) will abate, yet results reinforce inflation is starting to bear down on spending, even for a consumer cohort who has experienced very strong wage growth," said Jefferies analyst Stephanie Wissink in a note to clients.
Biggs struck an upbeat note on the balance of the year, which of course includes key selling periods such as back to school and the holidays.
"We still feel great about the business model of the company. I feel good about about the year. It's that we're dealing with some things that we haven't dealt with before and we'll work our way through it," Biggs added.
Yahoo Finance's Emily McCormick contributed to this story.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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