To The Moon

$Wal-Mart(WMT)$ lowered profit guidance again, and it fell sharply 10% in post trading. Associated with the decline of the whole supermarket retail sector.$Target(TGT)$$Costco(COST)$$TJX Companies(TJX)$.

It has bad performance in Q1

Walmart's record plummet means a lot, Here's the reason

Retailers did tell an American Horror Story, But so useful.

The updated guidance below

• Consolidated net sales growth for the second quarter and full year is expected to be about 7.5% and 4.5%, respectively. Excluding divestitures1, consolidated net sales growth for the full year is expected to be about 5.5%.
• Net sales include a headwind from currency of about $1 billion in the second quarter. Based on current exchange rates, the company expects a $1.8 billion headwind in the second half of the year.
• The company maintains its expectations for Walmart U.S. comp sales growth, excluding fuel, of about 3% in the back half of the year.
• Operating income for the second-quarter and full-year2,3 is expected to decline 13 to 14% and 11 to 13%, respectively. Excluding divestitures1, operating income for the full year2 is expected to decline 10 to 12%.
• Adjusted earnings per share4 for the second quarter and full year is expected to decline around 8 to 9% and 11 to 13%, respectively. Excluding divestitures1, adjusted earnings per share4 for the full year is expected to decline 10 to 12%

If you wonder what is previously like?

We believe, the performance is not completely lowered. The growth of revenue is actually upward moved. The company's explanation is "paradoxically set to benefit from a consumer trade-down, motivating a raised sales forecast".

In Q1 conference, Wal-Mart has declared not changing prices on a large scale in order to maintain its customer loyalty. Neither 3% increase in same-store sales nor the 4.5% growth is higher than CPI.  It means, Wal-Mart took the pressure of rising costs itself

Of course, the fierce competition in the retail industry is also the main reason.

The increasing sales growth also accelerate inventory consumption (good sign), but the discount also hurt margins (bad sign).

What we know from Q1,

1. Inventory levels historical highs. (Especially white goods)
2. Transportation costs rose sharply. (Oil price keeps high)
3. Laber costs beyond expectation. (Mispredicted the impact of pandemic)

They said these problems cannot be solved in one quarter, which means that they will have an impact on the whole year.

And this time, things just turn worse,

1. Clearing inventory will inevitably hurt profits
2. Oil price still higher in Q2
3. The extra labor cost still exists

In addition, the constant record high of the US dollar has brought forex headwind

It shall head south until good sign turns up.