Walmart Inc. (NYSE: WMT | MCD Price Prediction) stock has had an extraordinary run over the past year. It was up 72%, compared to 23% for the S&P 500. The run-up faces the reality of inflation. Almost 60% of Walmart’s U.S. sales are groceries. It faces large cost increases in several categories, led by coffee, oranges, beef, and eggs.
Coffee prices are up because of decreasing supplies from Brazil, which has suffered from drought, and Vietnam. The orange crops in Florida are at their lowest level since 1930 because of hurricanes and tornadoes.
Feed and labor costs have cut into the availability of beef, which boosted prices. Bird flu has cut back on the egg supply.
Tariffs proposed by the Trump administration could hit a wide variety of foods.
Much of Walmart’s recent success has been the strength of margins at its U.S. operations. In the most recent quarter, revenue for the unit rose 5% to $115 billion. But the operating profit performance was much larger. It grew by 9.1% to $5.4 billion. Walmart indicated that strong grocery sales at its Sam’s Club also helped the numbers.
Food prices were among the major reasons the consumer price index spiked to over 8% in 2022. The increase nearly knocked the economy off track. It may not do that in 2025, but an increase in food prices could dent Walmart’s earnings.
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