NEW YORK, Nov 16 (Reuters Breakingviews) - Walmart (WMT.N) boss Doug McMillon is struggling to convince investors that what’s good for consumers is also good for the mega-retailer he runs. The company’s top line grew 5.2% in the third quarter from a year earlier while the bottom line swung to a profit. It also raised its outlook on both figures for the year’s final three months. None of it stopped a nearly 8% slide in the shares on Thursday morning, which vaporized more than $35 billion of market value.
The reaction is partly explained by Walmart’s indication it sees signs of easing inflation. Groceries, which account for more than half the company’s sales and whose prices had shot up, helped boost the stock price over the past two years while those of Amazon.com (AMZN.O) and Target (TGT.N) both fell. Revenue growth may now slow while costs, including wages, could take longer to come down and squeeze profit margins. Operating expenses ticked up nearly a percentage point, to 21% of net sales, from the previous three quarters.
McMillon isn’t just sitting back and watching, though. Automation plans and advertising are likely to help mitigate at least some of the pressure. Even if the price of eggs is getting cheaper, there’s no clear reason Walmart’s stock should do the same.(By Jennifer Saba)
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