The real reason Walmart and Sam’s Club are struggling financially

When stores that thrived during a historic pandemic, like Walmart and Sam’s Club, struggle financially, that’s when you know things are really bad. Inflation is higher than it has been in the past 40 years, and ordinary consumers and big business are feeling the pinch (via NBC). On Tuesday, May 17, Walmart reported that first-quarter profits were down 24% from a year ago (via Northwest Arkansas Democrat-Gazette).

Many would think it was due to a drop in sales, but they actually exceeded expectations according to Walmart President and CEO Doug McMillon. The decline in profits is due to rising costs in other areas, such as employee salaries. Unlike many other companies facing understaffing, Walmart actually had a staff surplus because employees furloughed for COVID-19 returned to work early, overlapping staff who were hired to replace them.

With customers paying more for groceries and fuel, the department store saw sales of “general merchandise” decline, which is more profitable than the grocery business (according to Northwest Arkansas Democrat-Gazette). The final major driver of declining profits is the same problem many Americans face, soaring fuel prices. “At the end of the day, inflation has to come down,” said Brian Yarbrough, retail analyst at financial services firm Edward Jones. “With inflation as high as it is – 9% to 10% – low-income families cannot afford general merchandise.” Additionally, the USDA says food prices are about to get worse.