Walmart issued a profit warning, igniting a sell-off in shares of major retailers, quickly evaporating over $100 billion in stock market value in extended trade.
Walmart cut its forecast for full-year profit, saying that the massive retailer expects its adjusted earnings per share to drop as much as 13 percent. The announcement sounded an alarm that inflation is hurting its shoppers and forcing them to change what they spend on.
Walmart’s anticipated decline of 11 to 13 percent was massive compared to the 1 percent fall it previously forecast.
Inflation is leading customers to buy food rather than purchase higher-margin merchandise, Walmart said in its filing. This change in consumer spending has forced the retailer to cut prices on some items, like apparel, in order to reduce inventory. Walmart pledged to cut prices of general merchandise and clothing more aggressively than it previously did in May to also reduce a spring backlog.
Walmart’s stock tumbled over 9 percent in extended trade and other big retailers also sold off. Shares of rivals tanked after the warning from Walmart, signaling a “proverbial train wreck” for retailers.
Target, Amazon, Costco, Best Buy, Dollar General, Dollar Tree, and Home Depot all declined.
Target fell over 5 percent, and Amazon dropped 4 percent. Costco, Best Buy, Dollar General, and Dollar Tree fell more than 3 percent each, and Home Depot also dropped 2 percent.
Together retailers in the U.S. were down more than $100 billion in stock market value. Amazon and Walmart accounted for the vast majority of the decline.
The slide after hours on Monday adds to the 24 percent drop in the S&P 500 retailing index so far this year.
Experts called the warning a “cause for concern” for Walmart that highlights the pressure on all retailers.
Prices for gasoline and food are spiking, meaning consumers are no longer shopping for clothes, home goods, appliances, and kitchenware. Inventories are stocking up and were at the highest since at least 2000 in April this year.