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.