According to Reuters, Walmart has predicted lower profits this year due to fewer food stamps being issued, higher taxes, and less lenient credit. This news cost Walmart in the stock market, as its shares went down 1 percent in premarket trading.
This prediction came from a decrease in sales in the fourth quarter for Walmart, while competitors Kroger and Safeway both reported increases.
The sales in Walmart's grocery department have also decreased, mainly due to food stamp reductions caused by federal budget cuts. It is reported that one in five Walmart shoppers use food stamps.
In an attempt to curb this loss, Walmart will begin production on smaller stores in urban areas, between 270 and 300 of them. Edward Jones analyst Brian Yarborough believes these new stores will help, but not right away.
"The smaller format is a way to address the problems at grocery, but it's going to take multiple years for it to have a positive impact on overall results," he said in an interview with Reuters.
New CEO Doug McMillon wants to make fixing these reduced sales a top priority. He hopes that by using sales to entice buyers that profits will increase.
Outside of the U.S., sales for Walmart decreased in both Canada and Britain as well.
Walmart had warned investors that their sales would be abnormally low for what was to be a heavily promoted and discounted holiday season. Many Walmart competitors did not show these losses in sales, yet are known to target different demographics.
