Walmart – The First Quarter of Inflationary Impact

James Harris
Sep 14, 2022

Highlights for Suppliers:

Walmart Q1 results have been released and the results are largely problematic for the company and a negative view into the consumer spending power and patterns heading into the back half of 2022.  Topline Walmart US sales grew +4% with ecommerce only growing +1%. Ecommerce contribution to topline sales growth declined -30 bps. Meanwhile, inventories have grown +33.4%. Walmart saw larger than expected growth Q1 2021 and lost their largest fulfillment center to a fire. Meanwhile, Amazon posted quarterly sales declines of -3% year over year.

On the earnings call, Walmart CFO Brett Briggs stated that Walmart saw $100MM in unexpected markdowns due to high inventory and expects inventory levels to correct through the second quarter.  Operating expenses increased +95 bps while gross profit rate declined -38 bps. Walmart is seeing higher transportation related expenses (i.e., fuel, container costs, storage costs) and decreasing margin on items that are maintaining their sales rate with sales of higher margin items declining.

Sales growth was driven by the food and pet categories. Food saw an increase in market penetration while pet growth was largely driven by inflationary pressure. Pharmacy was also a sales growth leader.  General merchandise is the weakest portion of Walmart’s US business, driven by retail price increases resulting in velocity declines, not seeing stimulus related spending as was the case in 2021 and unseasonably cooler weather.


Inflation is playing a role in the top and bottom line, and the pace of change created a timing issue for us in Q1. We’re adjusting to the mix change and operational costs. Importantly, we expect the solid top-line performance to continue and we’re taking up sales guidance for the year. Customers and members are coming to us for value.
- Doug McMillon
We’re not happy with the profit performance for the quarter, and we’ve taken action, especially in the latter part of the quarter, on cost negotiations, staffing levels, and pricing, while also managing our price gaps.
- Doug McMillon
We’ll continue to reduce costs where we can and manage pricing in a way that preserves competitive price gaps, while managing the bottom line and passing on costs where they appear to be less temporary in nature.
- Brett Briggs
While we did see some supply chain improvement early in the quarter, the war in Ukraine and ongoing COVID impacts in various parts of the world including China led to increased challenges.
- Brett Briggs
Consumers are feeling inflation pressures as evidenced by an increase in grocery private brand penetration. The category mix shift along with increased inventory, some of which was delayed in arriving, led to higher-than-normal markdowns for general merchandise. In Q1, unexpected markdowns pressured Walmart US gross profit by about $100 million. We expect the inventory position to improve as we go through Q2. - Brett Briggs

Other Posts

Just a few of our resources available to help.
More Resources

We're ready to help you thrive!


Got it!

Thank you. We'll be in touch soon.
Oops. Please try again.