Walmart CEO John Furner says inflation is still weighing on retail customer

Walmart U.S. CEO John Furner spoke at the annual Jefferies Nantucket Consumer Conference this week, and it's clear that inflation is still weighing on the retail giant and its customers.

Jefferies analyst Stephanie Wissink stated in a new client note on Thursday that the tone was consistent with the recent earnings report – seeing rotation and spending changes while signaling encouraging market share and new customer capture. As core inflation in food, fuel, rent, and utilities affect household spending, clothing is the most fuel-sensitive category at Walmart first to be cut when gas prices spike. The company is among the retailers passing price increases to consumers to combat the inflation that Walmart is experiencing in labor, transportation, and its vast supply chain.

Wissink stated that management is passing through real time pricing in high-velocity consumables categories, keeping price gaps and low-price leadership. Inflation in non-consumables is still coming through the system. The analyst maintained a Buy rating on Walmart's stock with a $155 price target.

Furner's comments on consumer demand, followed similarly cautious comments by Target CEO Brian Cornell this week, came on the heels of a surprise earnings shortfall in May for the first quarter as supply chain inflation weighed on profits.

The company lifted its full-year sales growth outlook to 4% from 3% at the time. But inflationary pressures and working through excess inventory, which appears to be taking longer than expected, have clipped Walmart's profit outlook. Earnings per share fell by 1% this year compared to a prior outlook for a mid-single digit percentage increase.

We're seeing everything that's going on in the United States right now, said former Walmart CFO Brett Biggs, who retired and handed over the CFO reigns to former PayPal CFO John Rainey, told Yahoo Finance in an interview.

Walmart's stock shows investor concerns about a possible recession at the hands of a consumer spending pullback. Shares of the Dow Jones Industrial Average component are down 16.5% this year, compared to a 15.5% drop in the overall index.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Sozzi follows BrianSozzi on Twitter and LinkedIn.