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Walmart Inc. provides update for second quarter and fiscal year 2023 – Business Wire

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BENTONVILLE, Ark.–(BUSINESS WIRE)–Walmart Inc. (NYSE: WMT) provided a business update today and revised its outlook for profit for the second-quarter and full-year, primarily due to pricing actions aimed to improve inventory levels at Walmart and Sam’s Club in the U.S. and mix of sales.

Comp sales for Walmart U.S., excluding fuel, are expected to be about 6% for the second quarter. This is higher than previously expected with a heavier mix of food and consumables, which is negatively affecting gross margin rate. Food inflation is double digits and higher than at the end of Q1. This is affecting customers’ ability to spend on general merchandise categories and requiring more markdowns to move through the inventory, particularly apparel. During the quarter, the company made progress reducing inventory, managing prices to reflect certain supply chain costs and inflation, and reducing storage costs associated with a backlog of shipping containers. Customers are choosing Walmart to save money during this inflationary period, and this is reflected in the company’s continued market share gains in grocery.

“The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars. We’re now anticipating more pressure on general merchandise in the back half; however, we’re encouraged by the start we’re seeing on school supplies in Walmart U.S.” said Doug McMillon, Walmart Inc. president and chief executive officer.

Guidance updates

Based on the current environment and the company’s outlook for the remainder of the year, it is providing the following updates to its guidance.

  • Consolidated net sales growth for the second quarter and full year is expected to be about 7.5% and 4.5%, respectively. Excluding divestitures1, consolidated net sales growth for the full year is expected to be about 5.5%.
  • Net sales include a headwind from currency of about $1 billion in the second quarter. Based on current exchange rates, the company expects a $1.8 billion headwind in the second half of the year.
  • The company maintains its expectations for Walmart U.S. comp sales growth, excluding fuel, of about 3% in the back half of the year.
  • Operating income for the second-quarter and full-year2,3 is expected to decline 13 to 14% and 11 to 13%, respectively. Excluding divestitures1, operating income for the full year2 is expected to decline 10 to 12%.
  • Adjusted earnings per share4 for the second quarter and full year is expected to decline around 8 to 9% and 11 to 13%, respectively. Excluding divestitures1, adjusted earnings per share4 for the full year is expected to decline 10 to 12%.

1The company completed the sale of its operations in the U.K. and Japan in the first quarter of fiscal 2022.

The company’s updated guidance includes the effects of the following discrete items in the second quarter:

  • Proceeds from an insurance settlement for Walmart Chile, which positively affects operating income by $173 million and adjusted earnings per share by $0.05
  • Proceeds from a special dividend received by the company related to its equity investment in JD.com, which positively affects other gains and losses by $182 million and adjusted earnings per share by $0.05

The company will provide further details on business performance and its outlook for the year when it reports second-quarter results on Aug. 16, 2022.

About Walmart

Walmart Inc. (NYSE: WMT) helps people around the world save money and live better – anytime and anywhere – in retail stores, online, and through their mobile devices. Each week, approximately 230 million customers and members visit more than 10,500 stores and numerous eCommerce websites under 46 banners in 24 countries. With fiscal year 2022 revenue of $573 billion, Walmart employs approximately 2.3 million associates worldwide. Walmart continues to be a leader in sustainability, corporate philanthropy and employment opportunity. Additional information about Walmart can be found by visiting https://corporate.walmart.com, on Facebook at https://facebook.com/walmart and on Twitter at https://twitter.com/walmart.

1The company completed the sale of its operations in the U.K. and Japan in the first quarter of fiscal 2022.

2Growth rates reflect an adjusted basis for prior year results, which excludes business restructuring charges in the fourth quarter of fiscal 2022.

3Based on current foreign exchange translation rates, operating income includes estimated negative impacts of about $60 million and $100 million for the second quarter and fiscal 2023, respectively.

4Growth rates reflect an adjusted basis for prior year results, which exclude gains and losses on the Company’s equity investments, business restructuring charges, loss on extinguishment of debt recorded during the third quarter of fiscal 2022 and the incremental loss on the sale of the Company’s operations in the U.K. and Japan recorded during the first quarter of fiscal 2022.

Forward-looking statements

This release contains statements regarding Walmart management’s forecasts and guidance of or for consolidated net sales performance, comparable sales performance for its Walmart U.S. segment, consolidated operating income performance, adjusted earnings per share, and the impacts of foreign currency exchange rates, in each case, for the three month period ending July 31, 2022 and the full fiscal year ending January 31, 2023. Walmart believes such statements may be deemed to be “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Act”) and are intended to enjoy the protection of the safe harbor for forward-looking statements provided by the Act as well as protections afforded by other federal securities laws. Assumptions on which such forward-looking statements are based are also forward-looking statements. Such forward-looking statements are not statements of historical facts, but instead express our estimates or expectations for our consolidated, or one of our segment’s or business’, economic performance or results of operations for future periods or as of future dates or events or developments that may occur in the future or discuss our plans, objectives or goals.

Our actual results may differ materially from those expressed in or implied by any of these forward-looking statements as a result of changes in circumstances, assumptions not being realized or other risks, uncertainties and factors including: the impact of the COVID-19 pandemic on our business and the global economy; economic, capital markets and business conditions; trends and events around the world and in the markets in which we operate; currency exchange rate fluctuations, changes in market interest rates and market levels of wages; changes in the size of various markets, including eCommerce markets; unemployment levels; inflation or deflation, generally and in particular product categories; consumer confidence, disposable income, credit availability, spending levels, shopping patterns, debt levels and demand for certain merchandise; the effectiveness of the implementation and operation of our strategies, plans, programs and initiatives; unexpected changes in our objectives and plans; the impact of acquisitions, investments, divestitures, and other strategic decisions; our ability to successfully integrate acquired businesses; changes in the trading prices of certain equity investments we hold; initiatives of competitors, competitors’ entry into and expansion in our markets, and competitive pressures; customer traffic and average transactions in our stores and clubs and on our eCommerce websites; the mix of merchandise we sell, the cost of goods we sell and the shrinkage we experience; our gross profit margins; the financial performance of Walmart and each of its segments, including the amounts of our cash flow during various periods; the amount of our net sales and operating expenses denominated in the U.S. dollar and various foreign currencies; commodity prices and the price of gasoline and diesel fuel; supply chain disruptions and disruptions in seasonal buying patterns; the availability of goods from suppliers and the cost of goods acquired from suppliers; our ability to respond to changing trends in consumer shopping habits; consumer acceptance of and response to our stores, clubs, eCommerce platforms, programs, merchandise offerings and delivery methods; cyber security events affecting us and related costs and impact to the business; developments in, outcomes of, and costs incurred in legal or regulatory proceedings to which we are a party or are subject, and the liabilities, obligations and expenses, if any, that we may incur in connection therewith; casualty and accident related costs and insurance costs; the turnover in our workforce and labor costs, including healthcare and other benefit costs; our effective tax rate and the factors affecting our effective tax rate, including assessments of certain tax contingencies, valuation allowances, changes in law, administrative audit outcomes, impact of discrete items and the mix of earnings between the U.S. and Walmart’s international operations; changes in existing tax, labor and other laws and regulations and changes in tax rates including the enactment of laws and the adoption and interpretation of administrative rules and regulations; the imposition of new taxes on imports, new tariffs and changes in existing tariff rates; the imposition of new trade restrictions and changes in existing trade restrictions; adoption or creation of new, and modification of existing, governmental policies, programs, initiatives and actions in the markets in which Walmart operates and elsewhere and actions with respect to such policies, programs and initiatives; changes in accounting estimates or judgments; the level of public assistance payments; natural disasters, changes in climate, geopolitical events, global health epidemics or pandemics and catastrophic events; and changes in generally accepted accounting principles in the United States.

Our most recent annual report on Form 10-K and subsequent quarterly report on Form 10-Q filed with the SEC discuss other risks and factors that could cause actual results to differ materially from those expressed or implied by any forward-looking statement in the release and related management commentary. We urge you to consider all of the risks, uncertainties and factors identified above or discussed in such reports carefully in evaluating the forward-looking statements in this release. Walmart cannot assure you that the results reflected in or implied by any forward-looking statement will be realized or, even if substantially realized, that those results will have the forecasted or expected consequences and effects for or on our operations or financial performance. The forward-looking statements made today are as of the date of this release. Walmart undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.

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Oil Falls Below $80 As Powell Warns A Recession May Be Looming – OilPrice.com

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Oil Falls Below $80 As Powell Warns A Recession May Be Looming | OilPrice.com


Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

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  • WTI crude dipped below $80 on Friday.
  • Fears of slower economic growth and a recession in Europe spooked oil markets.
  • A third consecutive 75bps interest rate hike by the U.S. Fed forced crude prices lower earlier this week.

Trade

Oil prices dipped by 5% early on Friday, with the U.S. benchmark slumping to the lowest level since January, on the back of heightened concerns about slowing economic growth and recessions looming.

As of 10:06 a.m. ET on Friday, WTI Crude had dipped below the $80 a barrel mark, and was trading down by 5.58% at $78.83 per barrel. Brent Crude, the international benchmark, was at $86.11, down by 4.81% on the day.

The front-month WTI contract was headed to a drop of more than 5% this week, in which fears of slowing oil demand amid possible recessions trumped the escalation of the Russian war in Ukraine.

Oil prices jumped earlier this week when Vladimir Putin ordered a “partial mobilization” of 300,000 men to send to fight in Ukraine in the first mass draft in Russia since World War II. Putin also hinted at the possibility of using “any means” to defend Russia, which analysts interpreted as a threat he could use nuclear weapons.

Yet, oil prices fell later in the week on the strong dollar and fears of a recession intensified with major central banks hiking interest rates again to fight inflation. This week, the Fed raised the key rate by another 75 basis points for a third consecutive time. On the following day, the Bank of England raised rates by 50 basis points to 2.25%, the highest rate since the start of the 2008 financial crisis.

“Crude oil meanwhile headed lower after spending most of the week confined to a relative tight range with the Powell versus Putin battle (demand versus supply) not having a clear winner until Friday when both Brent and WTI dropped as the FOMC driven slump in risk appetite and growth angst was dialed up a notch as the dollar and yields continued to surge higher,” Ole Hansen, Head of Commodity Strategy at Saxo Bank said in a weekly commodities note on Friday.

“A difficult and potentially volatile quarter awaits with multiple and contradictory uncertainties having their say in the direction. While the risk to growth is being priced in, the market has left it to another day to worry about the supply-reducing impact of an EU embargo on Russian oil and fuel as well as a part reversal of the US selling 180 million barrels from its Strategic Reserves,” Hansen added.

By Charles Kennedy for Oilprice.com

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Why selloff in gold is not over: $1600 danger zone for gold price – Kitco NEWS

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Editor’s Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today’s must-read news and expert opinions. Sign up here!

(Kitco News)Gold is trading near 2.5-year lows after a hawkish Federal Reserve sent the U.S. dollar and Treasury yields higher. This macro environment is likely to push more people away from gold, creating a great buying opportunity, according to analysts.

Volatility in the markets and dramatic FX plays did not leave gold untouched as the precious metal fell another 1.7% this week. After raising rates by 75 basis points for the third time in a row, the Fed upped its funds rate to 4.4% by the end of 2022 and to 4.6% in 2023.

For markets, this could translate into another 75-basis-point hike in November and an additional 50-basis-point increase in December.

“We’ve seen significant increases in the markets’ estimates of what the federal funds rate will do over the next year. It is quite a big difference from a month ago, and it is in line with the Fed being more aggressive,” TD Securities global head of commodity markets strategy Bart Melek told Kitco News. “The real rates are rising. That’s negative for gold. High cost of carry and high opportunity cost will probably drive capital away.”

Also, this type of hawkishness means that the peak in the U.S. dollar rally is still some time away, which is bad news for gold.

“Looks like this dollar rally is not peaking. The current market environment will likely remain unsettling. Fed rate hike expectations are widely swinging. We are not going to see that ease up until we see inflation come down,” OANDA senior market analyst Edward Moya told Kitco News. “The problem is that we do not see the economy weaken quickly. When we do, that’s when you’ll see a peak in the dollar. For gold, it is all about when we see that.”

With the Dow touching the lowest level of the year Friday and more volatility ahead, gold is unlikely to see a strong rally in the short term. “We will not get a strong rush to buy gold just yet. There are low volatility instruments out there that are now giving you some yield. That is taking away from gold,” Moya added.

Eventually, gold will become a safe haven again as the appetite for equities wanes. But before that happens, the economy needs to slow, and inflation needs to decelerate. “Once we start seeing inflation moving into a more benign type level, the Fed can quickly turn. As they went from dovish to hawkish, they can go the other way. But it is unlikely any time soon,” Melek pointed out.



The big risk for the precious metal is a drop below $1,600 an ounce. “If we break $1,600, then $1,540 would be the line in the sand where we start to see buyers emerge. Gold will benefit from safe-haven flows abroad,” said Moya.

Melek also sees gold falling below $1,600 an ounce as likely. “Volatility will be higher going forward. As volatility increases, margin calls increase. Long positions can’t be extended. We are not going to see a big reentrance of positions. Nasty environment for gold,” he described.

Gold is watching the upcoming employment and inflation data from September. “The market is still looking at very tight labor conditions in the U.S. and implication that wage pressures will continue to be an issue,” Melek said.

Market consensus calls are looking for the U.S. economy to have created 300,000 positions in September, with the unemployment rate at 3.5%, which is near 50-year lows.

On a positive note, gold at these levels is a great entry point for buyers.

“This makes physical gold cheaper. It’s a buying opportunity. The Fed has been stressing that they have a dual mandate. And as inflation gets under control, the Fed could be quick to reverse in 2023. Real rates will be much more friendly to gold. I do expect gold to do well in the long-term,” Melek said.

However, for now, resistance is at $1,678-80, and support is around the $1,580 an ounce level, he added.

Next week’s data

Tuesday: Fed Chair Powell speaks, U.S. durable goods orders, CB consumer confidence, new home sales
Wednesday: U.S. pending home sales
Thursday: U.S. jobless claims, GDP Q2
Friday: U.S. persoanl income and PCE price index, Michigan consumer sentiment

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Risk assets crushed with few signs drama is over – BNN Bloomberg

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A selloff in the riskier corners of the market deepened as the U.K.’s plan to lift its economy fuelled concerns about heightened inflation that could lead to higher rates, adding to fears of a global recession.

It was a sea of red across equity trading desks, with the S&P 500 briefly breaching its June closing trough — and failing to pierce its intraday low for the year. Chartists looking for signs of where the rout might ease had identified that as a potential area for support. Yet the lack of full-blown capitulation may be an indication the drawdown isn’t over. Goldman Sachs Group Inc. slashed its target for U.S. stocks, warning that a dramatic upward shift in the outlook for rates will weigh on valuations.

As risk-off sentiment took hold, Wall Street’s “fear gauge” soared to a three-month high, with the Cboe Volatility Index momentarily topping 30. Throughout the year, the U.S. equity benchmark has hit near-term lows when the VIX was above that level, according to DataTrek Research.

A surge in the greenback to a fresh record swept aside global currencies. The euro slid to its weakest since 2002, while sterling hit a 37-year low — with former U.S. Treasury Secretary Lawrence Summers saying that “naive” U.K. policies may create the circumstances for the pound to sink past parity with the dollar. 

Treasury 10-year yields fell after earlier topping 3.8 per cent. Meanwhile, two-year US rates climbed for 12 straight days — an up streak not seen since at least 1976. 

“It appears that traders and investors are going to throw in the towel on this week in what feels like ‘the sky is falling’ type of event,” said Kenny Polcari, chief strategist at SlateStone Wealth. “Once everyone stops saying that they ‘think a recession is coming’ and accepts the fact that it is here already – then the psyche will change.”

Liz Truss’s new U.K. government delivered the most sweeping tax cuts since 1972 at a time when the Bank of England is struggling to rein in inflation, which is running at almost five times its target. The plunge in gilts means that investors are now betting the central bank boosts its benchmark lending rate by a full point to 3.25 per cent in November, which would be the sharpest increase since 1989.

Amid heightened fears over a hard economic landing, commodities got hammered across the board. West Texas Intermediate settled below $79 a barrel for the first time since January, posting its longest stretch of weekly losses this year. Not even gold — a haven asset — was able to gain due to a surging dollar, and sank to the lowest level in two years.

The greenback’s strength has been unrelenting and will also exert a “meaningful drag” on corporate earnings — serving as a key headwind for stocks, said David Rosenberg, founder of his namesake research firm.

KKR & Co. sees potential trouble ahead, including a mild recession next year, with the Fed narrowly focused on driving up unemployment to tame inflation. The US labor shortage is so severe that it’s possible the Fed’s tightening doesn’t work, wrote Henry McVey, chief investment officer of the firm’s balance sheet.

“This is a more draconian outcome than corporate profits falling,” he noted, “because it will encourage the Fed to tighten even further.”

Investors are flocking to cash and shunning almost every other asset class as they turn the most pessimistic since the global financial crisis, according to Bank of America Corp. Investor sentiment is “unquestionably” the worst it’s been since the turmoil of 2008, strategists led by Michael Hartnett wrote in a note.

“It’s a realization that interest rates are going to continue to rise here and that that’s going to put pressure on earnings,” said Chris Gaffney, president of world markets at TIAA Bank. “Valuations are still a little high even though they’ve come down, interest rates still have a lot further to go up and what impact that will have on the global economy — are we headed for a sharper recession than the recession everybody expected? I think it’s a combination of all of that, it’s not good news.”

‘MEANINGFUL DRAG’

Amid heightened fears over a hard economic landing, commodities got hammered across the board. West Texas Intermediate tumbled below $79 a barrel for the first time since January, posting its longest stretch of weekly losses this year. Not even gold — a haven asset — was able to gain due to a surging dollar, and sank to the lowest level in two years.

The greenback’s strength has been unrelenting and will also exert a “meaningful drag” on corporate earnings — serving as a key headwind for stocks, said David Rosenberg, founder of his namesake research firm.

KKR & Co. sees potential trouble ahead, including a mild recession next year, with the Fed narrowly focused on driving up unemployment to tame inflation. The US labor shortage is so severe that it’s possible the Fed’s tightening doesn’t work, wrote Henry McVey, chief investment officer of the firm’s balance sheet.

“This is a more draconian outcome than corporate profits falling,” he noted, “because it will encourage the Fed to tighten even further.”

Investors are flocking to cash and shunning almost every other asset class as they turn the most pessimistic since the global financial crisis, according to Bank of America Corp. Investor sentiment is “unquestionably” the worst it’s been since the crisis of 2008, strategists led by Michael Hartnett wrote in a note.

“It’s a realization that interest rates are going to continue to rise here and that that’s going to put pressure on earnings,” said Chris Gaffney, president of world markets at TIAA Bank. “Valuations are still a little high even though they’ve come down, interest rates still have a lot further to go up and what impact that will have on the global economy — are we headed for a sharper recession than the recession everybody expected? I think it’s a combination of all of that, it’s not good news.”

EXTREME PESSIMISM

Stocks are indeed still far from being obvious bargains. At the low in June, the S&P 500 was trading at 18 times earnings, a multiple that surpassed trough valuations seen in all previous 11 bear cycles, data compiled by Bloomberg show. In other words, should equities recover from here, this bear-market bottom will have been the most expensive since the 1950s. 

Bleak sentiment is often considered a contrarian indicator for the US stock market, under the belief that extreme pessimism may signal brighter times ahead. But history suggests that equity losses may accelerate even further from here before the current bear market ends, according to Ned Davis Research.

In another threat to stocks, different iterations of the so-called Fed model, which compares bond yields to stock earnings’ yields, show equities are least appealing relative to corporate bonds and Treasuries since 2009 and early 2010, respectively. This signal is getting attention among investors, who can now know look to other markets for similar or better returns.

“The next question is when and how far do earnings estimates decline for 2023,” said Ellen Hazen, chief market strategist and portfolio manager at F.L. Putnam Investment Management. “Earnings estimates for next year are too high, they really have not come down, and as that happens you’re going to have further equity pain because in addition to the multiple coming down via the yield mechanism, the earnings you’re applying that multiple to are going to come down as well.”

As slower growth and tighter financial conditions start catching up to companies, a wave of downgrades will come for the US investment-grade corporate bond market.

That’s according to strategists at Barclays Plc, who say companies are facing margin pressure thanks to high inventories, supply chain issues, and a strong dollar. The firm expects the average monthly volume of downgrades to increase to $180 billion of bonds over the next half year. The current monthly average is closer to $40 billion.

Some of the main moves in markets:

Stocks

  • The S&P 500 fell 1.7 per cent as of 4 p.m. New York time
  • The Nasdaq 100 fell 1.7 per cent
  • The Dow Jones Industrial Average fell 1.6 per cent
  • The MSCI World index fell 2.1 per cent

Currencies

  • The Bloomberg Dollar Spot Index rose 1.3 per cent
  • The euro fell 1.5 per cent to $0.9693
  • The British pound fell 3.5 per cent to $1.0868
  • The Japanese yen fell 0.6 per cent to 143.30 per dollar

Cryptocurrencies

  • Bitcoin fell 2.2 per cent to $18,823.63
  • Ether fell 2.4 per cent to $1,292.77

Bonds

  • The yield on 10-year Treasuries declined four basis points to 3.68 per cent
  • Germany’s 10-year yield advanced six basis points to 2.02 per cent
  • Britain’s 10-year yield advanced 33 basis points to 3.83 per cent

Commodities

  • West Texas Intermediate crude fell 5.3 per cent to $79.06 a barrel
  • Gold futures fell 1.7 per cent to $1,651.80 an ounce

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