From Breakingviews - Walmart’s ho-hum is the new fabulous
retail business. As the shine comes off of technology companies, Walmart’s failures are an afterthought.on Tuesday that a lack of visibility into its shoppers is causing Walmart to exercise caution. U.S sales for the same set of stores is expected to rise to 2.5% in the company’s fiscal year which ends in January, the high end of Walmart’s guidance, but below analysts’ expectations of 3%, according to Refinitiv. Profits meanwhile are getting crunched.
The problem is that the consumers are shifting their spending to groceries versus general merchandise, and food inflation is still stubborn. Walmart’s commitment to keeping prices low is reflected in its operating margins that currently hover at a slim 3%. To make up for operating statis, Walmart is casting about for new sales streams including advertising, which Cowen reckons could have a chunky margin of 30%. But any effects won’t kick in until after January 2024.
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