Fast company logo
|
advertisement

FINANCING THE FUTURE

Why are Amazon, Target, and Costco stock prices down? Blame Walmart (and inflation)

Call it the retail stock apocalypse. As inflation causes prices to soar, Walmart is sitting on billions in inventory. And customers aren’t buying.

Why are Amazon, Target, and Costco stock prices down? Blame Walmart (and inflation)

[Source Images: Sean Gladwell/Getty]

BY Michael Grothaus1 minute read

Investors in big retail stocks could be in for a bumpy week—or longer. Shares in major U.S. retailers are down across the board this morning in pre-market trading. As of the time of this writing, Amazon (AMZN) is down 3.5%, Target (TGT) is down 5.3%, and Costco (COST) is down 3.1%. And then there’s Walmart (WMT), which is down a staggering 9.4%. Here’s what you need to know:

  • Why is Walmart’s share price crashing? WMT is currently down 9.4% in pre-market trading because yesterday it slashed its profit forecast for the year. Originally Walmart said its profit would decline 1% for the full year, but yesterday Walmart revised that to a decline of between 11% and 13%.
  • Why did Walmart revise its numbers downward? Simply put, people aren’t buying Walmart’s inventory as quickly as the company needs them to. As Reuters notes, in May Walmart was sitting on $60 billion of inventory that customers weren’t buying. If people aren’t buying existing inventory, Walmart has less space for the inventory customers do want to buy. This is causing a sales slowdown across the board.
  • But why aren’t customers buying as much from Walmart? If there’s one main factor to call out, it’s inflation. Fuel and food costs are soaring this year. When gas and food prices go up, households usually cut back on household goods and clothing (Walmart’s bread and butter). If you can hardly afford to put food on the table, you aren’t going to buy that new toaster or fourth pair of jeans you don’t really need.
  • If Walmart is struggling, why are the stock prices of Amazon, Target, and Costco down? Because Walmart is a bellwether for other U.S. retail stocks. If inflation is causing Walmart sales to slow and a backlog of inventory to grow, the Street logically assumes the same can happen to other retailers, hence the fall in their stock prices. Amazon, for its part, is set to report its second-quarter earnings on Thursday.
  • So what is Walmart to do? The company has said it will slash prices to move existing inventory. That could mean plenty of nice sales for customers, but still, there’s no guarantee that those already struggling with inflationary costs will opt to spend on non-necessities over essentials like gas and food.
advertisement
CoDesign Newsletter logo
The latest innovations in design brought to you every weekday.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Privacy Policy

ABOUT THE AUTHOR

Michael Grothaus is a novelist and author. He has written for Fast Company since 2013, where he's interviewed some of the tech industry’s most prominent leaders and writes about everything from Apple and artificial intelligence to the effects of technology on individuals and society. Michael’s current tech-focused areas of interest include AI, quantum computing, and the ways tech can improve the quality of life for the elderly and individuals with disabilities More


Explore Topics