Walmart slashes prices and profit forecasts as Americans cut back on discretionary goodies like clothes

Ignoring the leggings at the front... and beelining to the grocery aisles. Walmart said that high fuel and food prices are causing Americans to cut back on discretionary spending (think: floral dresses, instant pots, decorative pillows). The consumer bellwether has been marking down the price of clothing and big-ticket items to help unload unsold inventory. Cue:

• America’s largest retailer slashed its annual profit forecast. While Walmart expects quarterly store sales will grow, the growth is coming from less profitable items like groceries.
• Walmart stock dropped 8% yesterday. Amazon, which reports tomorrow, dropped 5% as investors feared it may be experiencing a similar fate.

Nuggets > new kicks... Big-ticket items like apparel and electronics typically have higher profit margins, but consumers are cutting spending in those categories to afford necessities like food and gas. Americans are also trading down to cheaper beer brands (like: Busch Light vs. Corona) and discount cigarettes (like: Edgefield vs. Marlboro). But not every consumer staple is suffering:

• McDonald's reported expectation-beating profits yesterday as price hikes and value deals fueled same-store sales growth. The $2 breakfast's still going strong.
• Coke beat earnings expectations and boosted its annual sales forecast thanks to price hikes and rebounding “away-from-home” soda sales (movie theaters, restaurants).