- Shares in top retailer Walmart dropped by as much as 9% in Tuesday's premarket.
- Walmart cut its profit forecast for 2023 the previous day and cited inflation as a main driver.
- Rising food and gas prices are hurting wallets and consumers' ability to buy other products.
Shares in Walmart dropped by as much as 9% in premarket trading on Tuesday after the biggest US retailer cut its profit forecast due to soaring food and gas prices.
Walmart was down 9.3% at 6:40 am ET to trade at $119.17 per share, having dropped by almost 10% in after-hours trading the previous day.
Inflation running at 41-year highs has hit Walmart's customers' spending power and it's forced the company to slash its profit forecast for 2023, with earnings per share expected to drop about 11% to 13%.
The company said customers have cut back spending on items like clothing, as a result of the rising cost of basics like groceries. Walmart said on Monday it could cut the price of general merchandise, including clothing, to help shoppers and reduce inventory.
"The increasing levels of food and fuel inflation are affecting how customers spend," Walmart CEO Doug McMillon said in a press-release statement.
Inflation accelerated to its fastest pace since November 1981, climbing 9.1% through June. Meanwhile, food prices in the same month increased more than 10% from last year, according to the latest government consumer price data. Such fast price growth comes on the back of Russia's war with Ukraine as sanctions and boycotts on Moscow disrupt global markets, especially the energy sector, with oil prices jumping more than 40% since this time last year.
Walmart, which is considered a bellwether for the overall economy, issued a gloomy outlook for the rest of the year, which sent shares in other top US retailers like Target, Amazon and Nordstrom lower.
"Stock markets are a harsh mistress now if the pandemic-derived growth fantasies can't be maintained," OANDA analyst Jeffrey Halley said.
