NEW YORK, July 26 ― Top US retailer Walmart Inc yesterday said its 2022 profits would drop much further than previously forecast as surging prices for food and fuel prompted customers to cut back on discretionary purchases, and its shares slid 10 per cent in trading after the bell.

Shares of rivals including Target and Amazon.com also tanked after Walmart's warning, which signalled a “proverbial train wreck” for retailers, Burt Flickinger, managing director of Strategic Resource Group said.

Walmart, bellwether for the retail sector, said full-year profits would now decline 11 per cent to 13 per cent, much steeper than the 1 per cent fall it previously forecast. It pledged to cut prices of clothing and general merchandise more aggressively than it did in May to reduce a spring backlog.

Excluding divestitures, full-year earnings per share are expected to drop 10 per cent to 12 per cent, the company said.

Neil Saunders, managing director at GlobalData called the warning a “cause for concern” that highlights the pressure that all retailers are currently under.

With prices for gasoline and food spiking, consumers are cutting back on purchases of discretionary items, saddling retailers with mountains of inventory including apparel, home goods, appliances and kitchen ware.

Supply chain snafus and miscalculations around demand have added to problems. In May, Walmart said it was sitting on over US$60 billion (RM267 billion) of inventory at the end of the first quarter. It promised “aggressive” price cuts on items such as apparel.

Yesterday, the company said it needed more price cuts to pare inventories.

“The increasing levels of food and fuel inflation are affecting how customers spend ... we're now anticipating more pressure on general merchandise in the back half,” Doug McMillon, Walmart's chief executive officer, said.

Last month, Walmart's smaller rival Target cut its profit forecast further, and said it would resort to aggressive actions including cutting prices and cancelling orders to cut back US$15 billion in inventories.

Walmart said it estimates adjusted earnings per share for the second quarter to now decline around 8 per cent to 9 per cent, compared with the flat to slightly up it previously anticipated.

Walmart raised its forecast for US comparable sales, excluding fuel, to 6 per cent, however, mainly to account for the rise in food prices. It previously expected those sales to be up 4 per cent to 5 per cent. ― Reuters