Walmart Admitted Slashing Price Tags for Clearance of its Huge $60B Inventory

Yesterday, on August 16, Walmart Stores (WMT) published its highly anticipated semiannual financial report. The retail titan pointed out that customers have become more focused on purchasing essentials, like groceries over items like clothing, as Americans' budgets feel the hit from bulging inflation, which, as we know, remains near a 40-year high.

The consensus estimate expected Walmart to post earnings per share of $1.62 for Q2, down 8.9% from earnings per share of $1.78 a year ago. But Wall Street anticipates revenue at $150.81 billion, which would be a 6.9% boost from the $141.05 billion the retail giant posted in the same quarter in 2021.

Just like its main rival Target (TGT, just reported today, August 17) did, Walmart said it slashed prices on clothing and other merchandise to help clear inventory valued at more than $61 billion at the end of Q1. Walmart also reported having maintained inventories of $59.92 billion at the end of Q2 to July 31, 25% above last year's level.

Walmart cautiously predicts that its business may have stabilized after surging inflation for food and gas weighed on the company's guidance a few weeks ago. The world's largest retailer revised its full year guidance for profits to drop 9% to 11% from a prior range for a 11% to 13% decline. At the current price given its PE pushing higher past 40x, WMT stock looks warranted SELL rating.