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Walmart cuts off profit outlook and Amazon sinks

Amazon shares have fallen down over 4% on Monday in extended trading. It happened after Walmart said that it was cutting off its full-year and quarterly profit guidance.

On Monday, after the bell, the company announced that it had certain expectations. First, the adjusted earnings for every share for the full-year and 2nd quarter will slide nearly 11%-13% and 8%-9%. Earlier, it forecasted that it would be flat to up a bit for 2nd quarter. Also, it said that there would be a drop of 1% for a full year.

According to the company, the move on increasing inflation, especially in fuel and food, is responsible. Walmart said that it affects the way the customers spend. It also expects that same-store sales will increase by nearly 6% in the United States in the 2nd quarter, except for fuel.

More customers are spending on necessities and are spending less on unneedful items. In addition, the heightening levels of fuel and food inflation are affecting customer behavior. So in terms of clearing the hardline categories, things are good. But the Walmart U.S. needs markdown dollars largely, according to Dough McMillon, the CEO of Walmart.

The guidance cut will arrive a few days before Amazon will report 2nd quarter earnings on Thursday. Wall Street is going to watch things closely. It is going to see how the eCommerce giant navigates the macro pressures from certain factors. The problem includes inflation, slow consumer spending, and the current supply chain constraints. So, Walmart’s move is unexpected.

In the earnings call of the previous quarter, the CEO of Amazon, Brian Olsavsky, was asked certain things. The primary one was whether Amazon is encountering any weakness in customer spending. Olsavsky said that Amazon is not encountering anything as such.

In extended trading, the stock of Walmart has fallen by over 8%. This announcement spooked the investors in the other retailers as well. Shares of Costco and Target fall down by 2% and 5%, respectively. And Nordstrom’s stock went down about 3%.

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