26th Jul 2022 17:58
(Alliance News) - Walmart Inc's profit warning painted a gloomy picture of the US consumer, though analysts at Shore Capital Markets believe UK retailers face similar problems.
Consumer confidence, spending and income trackers in the UK have all taken a hit recently, the broker said.
Walmart on Monday said its annual profit will be weaker than expected as rampant food inflation means consumers are doing less general merchandise spending.
Second quarter sales will top expectations, though the top-line will only be boosted by lower margin offerings, such as food.
Operating income for the second-quarter will decline 13% to 14%. For the full-year, it will slump 11% to 13%.
"We believe this could be a warning sign for other retail companies, and with this in mind, we note some of the recent UK data that's been published during July and has echoed a similar gloomy consumer outlook," analysts at Shore commented.
GfK's long-running Consumer Confidence Index languished at a historic low of minus 41 in July, despite a two-point uptick in hopes for personal finances over the next 12 months, figures on Friday showed.
Shore also noted the latest Barclaycard consumer spending data, published earlier in July and covering June.
"Overall spending increased by 6.2%. Travel and leisure prove again to be a maverick, however, there were clear signs of concerns regarding rising living costs, with consumers becoming more selective about their spending and feeling less able to live within means each month," the broker explained.
Finally, the latest Asda income tracker showed another fall in UK disposable incomes.
Figures on Monday showed a drop in average household disposable income of GBP43.95 a week in June, equivalent to GBP175.80 per month.
Shore added: "This is the eighth consecutive monthly decline in disposable income and the statement points out that low-income families are particularly feeling a squeeze, with 20% of UK households now having 'negative disposable income'."
Walmart shares were 7.8% lower at USD121.75 each in New York on Tuesday afternoon.
Walmart-related worries fed through London-listed retailers.
JD Sports Fashion PLC fell 8.0%, Asos PLC shares gave back 7.9%, AO World PLC lost 8.4% and Made.com Group PLC dropped 9.1%.
On Walmart, Avatrade analyst Naeem Aslam commented: "The company warned once again that the threat of a recession is a real one as spending by consumers has dropped in their stores. Walmart cut its profit forecast due to rising food inflation and painted a highly gloomy picture for the US economy.
"This is despite the fact that President Biden doesn't think that the US economy will face a recession. However, it is a different matter that the US has now changed the official definition of recession. In reality, the US is already in a recession."
By Eric Cunha; [email protected]
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