Walmart Says Fuel Pain Is about to Show up at the Checkout

FOX Business, the Wall Street Journal, NBC News, NPR, Reuters, AP, Business Insider, and BBC contributed to this report.

Walmart is warning shoppers that the squeeze may be getting worse.

After its latest earnings report, the retailer said higher fuel costs are starting to bite harder, and the real pain could show up now that tax refund season is fading. CFO John David Rainey said those refunds had been cushioning the blow for a while. That buffer is gone. Fuel prices are still high. And customers are likely to feel it more in the weeks ahead.

“We think higher tax returns muted some of the pressure related to higher fuel prices,” Rainey told CNBC. “As we’re in a period right now where those tax refunds are largely not coming in, I think consumers are going to feel more of that pressure.”

That is not great timing for households already juggling pricier groceries, rent and utilities. It is especially rough for lower-income shoppers, who spend a bigger share of their paychecks on basics and have less room to absorb higher costs. Rainey said Walmart is seeing a split in how Americans are behaving: wealthier customers are still spending fairly freely, while lower-income shoppers are getting tighter with every dollar.

The fuel numbers are ugly. Gasoline prices are up sharply from a year ago, and Walmart says it took a $175 million hit last quarter just from higher fuel expenses. The company held prices down anyway, saying it wanted to protect customer trust. That may not be sustainable if costs stay elevated.

For now, Walmart’s sales are still solid. Revenue rose 7.3% to $177.8 billion in the first quarter, and US comparable sales climbed 4.1%. E-commerce was also strong, and more shoppers are leaning on Walmart’s delivery and membership services. Sam’s Club even got a bump from drivers looking for cheaper gas.

But the warning signs are there. Customers are buying fewer gallons at the pump, spending less per visit, and generally acting a little more cautious. Walmart said it is watching fuel prices closely, and if they stay high, the company may have to raise retail prices later in the year.

That is the part investors did not like. Shares dropped after the warning, and the company’s guidance also came in lighter than Wall Street wanted.

The bigger picture is pretty simple: when gas jumps this much, Walmart feels it first, and so do the people who shop there. The company can absorb some of the hit for now. Eventually, that bill has to land somewhere.