What's going on?

Walmart reported much weaker-than-expected earnings on Tuesday, as the big-box retailer’s aspirations for a hedonistic Spring Break were well and truly washed out.

What does this mean?

Walmart was waxed, vaxxed, and ready to go last quarter: the retailer had stocked up on everything from barbecues to pool chemicals, only for unseasonably wet weather to derail everyone’s outdoor plans. The company found itself overstaffed too, after workers reduced their Covid leave to get back to their bread-winning ways. That left Walmart with higher labor costs, which was partly to blame for a 25% drop in profit from the same time last year. And since it doesn’t think higher costs are going away anytime soon, the company cut its profit outlook for the year. It’s not exactly the debaucherous trip to Cancun it was hoping for: investors sent Walmart’s stock down 9% after the announcement.

Why should I care?

The bigger picture: Inflation has bitten.
As the world’s biggest retailer, Walmart is a go-to for economists trying to understand how Americans are handling record inflation. Its results probably confirmed what they already knew: Walmart said customers bought more of its own-brand products and fewer discretionaries like electronics and clothing. Those are telltale signs of high inflation, when consumers tend to plump for discount goods and scale back on nice-to-haves.

Zooming out: Credit where credit’s due.
You wouldn’t notice this shifting behavior if you just looked at US retail data, which showed on Tuesday that the value of retail sales in the US grew 0.9% in April from the month before. But that measure isn’t adjusted for inflation, so it’s likely that shoppers were spending more to buy less. There’s also the possibility that Americans are loading up on credit card debt to buy what they need, with data out last week showing that they opened a record 537 million accounts last quarter.