[Asia Economy Reporter Jeong Hyunjin] U.S. retail giant Walmart experienced its worst stock price plunge in 35 years as its performance this year is expected to deteriorate significantly due to high inflationary pressures. As a result, the Walton family, the world's wealthiest family, saw their assets shrink by 24 trillion won in a single day.
According to Bloomberg and other sources on the 17th (local time), Walmart closed at $131.35 on the New York Stock Exchange, down 11.38% from the previous day. Until the day before, the stock price had risen 2.4% since the beginning of the year, showing resilience amid an overall downward market trend, but it plummeted in just one day. The decline was the largest since the 'Black Monday' of October 1987 on the NYSE.
The stock plunge came after Walmart's earnings announcement that day. Walmart reported that its sales for the first quarter of fiscal year 2023 (February to April) increased by 2.6% year-on-year to $141.6 billion, while operating profit fell 22.7% to $5.3 billion. Although sales increased, operating profit sharply declined due to supply chain-related costs and labor expenses.
The bigger problem is the worsening outlook for this year's performance. Walmart stated that its annual net income is expected to decrease by 1% compared to the previous year. This marks a significant downgrade from the initial guidance, which anticipated mid-single-digit growth. Walmart also forecasted that operating profit would remain flat.
The reason is high inflation. Doug McMillon, Walmart's CEO, said, "It is unusual for inflation in the U.S. to be this high and move this quickly across groceries and general merchandise," adding that high grocery prices will lead consumers to reduce spending on general merchandise. Bloomberg explained that groceries generally have lower profitability compared to general merchandise. Additionally, rising oil prices, logistics costs, and labor expenses were cited as factors worsening performance.
The U.S., Walmart's main market, is facing the worst inflation in 40 years. John San Marco, portfolio manager at global asset management firm Neuberger Berman, which holds 3.5 million Walmart shares, said, "We knew retail would be tough due to inflation, but we thought Walmart would be a safe place," adding, "But that turned out not to be the case."
As Walmart's stock price plummeted, the Walton family's assets, the world's richest family and owners of Walmart, shrank by more than 24 trillion won. The assets of Sam Walton's three children?Alice, Jim, and Rob?each decreased by over $5 billion in a single day, while the assets of daughter-in-law Christy and grandson Lucas Walton also fell by $876 million and $1.71 billion, respectively.
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