Stung by criticism that there was no advance warning of the decline in Q1 earnings released on May 17th, Walmart Stores issued a pre-announcement projection cutting Q2 and FY 2023 profit in a release on July 25th after close of trading.

Doug McMillon, CEO stated  "The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars." He added, "We’re now anticipating more pressure on general merchandise in the back half."

Guidance for FY 2023 was lowered for revenue growth that was reduced to 4.5 percent; Same-store sales increase restated to 3.0 percent, operating income down by 12 percent and EPS 8.5 percent lower.

Predictably shares dropped sharply in after-hours trading. WMT was down 8.5 percent from the Tuesday 26th open to $120.70 at 10H30. The sharp decline affected Amazon (down 3.7 percent) and Target (down 3.9 percent) that fell in sympathy.

The question of importance is whether the Walmart pre-announcement reflects the economy or whether this is a self-inflicted wound. The consensus is that the Company overstocked in anticipation of ongoing supply-chain disruption and inflation. A company-specific problem is that their demographic is heavily impacted by inflation in fuel and utilities. Their customers have shifted to essentials including groceries, away from discretionary expenditure on clothing, toys and electronics.