Shares of Walmart (NYSE:WMT) dropped early Tuesday morning after some of the comments from the company’s finance chief spooked investors and left the stock more than 2% lower at the open.
At the Bank of America London Investor Conference, Walmart (WMT) CFO John Rainey warned that the current quarter won’t see sales as strong as they were in the previous quarter.
“Not every quarter is going to be as good as the last quarter,” Rainey said, adding that “certainly the quarter that we’re in, the second quarter, is our most challenging quarter from a comp perspective for the year.” In Q1, Walmart reported comp sales – excluding fuel of +3.9%.
The company is also facing margin pressures as consumers shift spending from general merchandise to food, the latter of which has a lower profit margin.
Also adding pressure to Walmart’s (WMT) bottom line is rising wages, “the single biggest bit of inflationary pressure that we saw in our Walmex business this year,” Rainey said.
While rising wages across Mexico are also giving consumers more to spend, it drove up Walmex’s SG&A by 12.4% in Q1 with labor cost increases and investments in strategic growth only partially offset by operational efficiencies.