Walmart stock drops as supply chain, labor cost challenges hit margins

Author : Pankaj Singh | Published Date : 2021-11-18 

American multinational retail chain Walmart Inc.’s shares reportedly fell by 2.5% due to the negative impact of high labor and supply chain costs on its Q3 margins.

Transportation bottlenecks, closed facilities in parts of Asia, and lack of raw materials in recent months have hindered major retailers such as Amazon to get their products into the United States ahead of the peak shopping season.

To mitigate supply chain disruptions, Walmart started leasing its vessels to transport goods, order products in advance, and reroute supplies to less congested ports, however, the retail giant’s margins still took a hit.

The company’s fourth-quarter gross margin rate in the United States is likely to drop 10-30 basis points due to supply chain issues or inflation, knowledgeable sources cited.

Walmart CEO Doug McMillon stated that sustained demand for products stretched supply chains, resulting in out-of-stocks and inflation.

The company’s results come only weeks after the world's largest e-commerce firm Amazon announced an unsatisfactory fourth-quarter outlook and warned of increasing costs during the holiday season.

Walmart's gross margins fell 42 basis points in the third quarter, despite growing contributions from its advertising unit helping to offset some supply-chain pressures.

In anticipation of a jump in demand for toys and apparel during the holidays, Walmart said it expects full-year same-store sales in the United States to be more than 6%, higher than its previous prediction of 5% to 6%. The adjusted profit per share is estimated to be about USD 6.40, up from a range of USD 6.20 to USD 6.35 before.

Sales at the U.S. stores operating for at least a year increased 9.2% in the third quarter, excluding gasoline, thanks to high grocery demand and increasing customers purchases. Meanwhile, Walmart's international division rose by approximately 10%, excluding the effects of currency changes and divestitures.

Total revenue increased by 4.3%, reaching USD 140.53 billion, and adjusted earnings per share reached USD 1.45, 5 cents more than Wall Street projections.

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Pankaj Singh

Pankaj Singh

Endowed with a post graduate degree in management and finance, Pankaj Singh has been a part of the online content domain for quite a while. Having worked previously as a U.K. insurance underwriter for two years, he now writes articles for fractovia.org and other online portals. He can be contacted at- [email protected] | https://twitter.com/PankajSingh2605

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