Rising Prices and K-Shaped Recovery: Kohl's, Walmart, and McDonald's Earnings Signal Trouble Ahead
Kohl's and Walmart recently reported earnings that showed lower comparable store sales and revenue. The numbers for Kohl's were not as bad as expected, but still reflected a struggling low-income consumer market. The company saw revenue of $3.3 billion for the most recent quarter, with EPS at $1.34, slightly off from expectations.
McDonald's and Walmart also reported earnings that showed a similar trend. The problem is not just limited to these companies but reflects a broader issue in the US economy. The K-shaped recovery has been cited as a major concern, where the upper-income segment of the population is not carrying the entire economy due to their spending power.
The rising gas prices are a significant contributor to this trend, with diesel prices up over 40% year-over-year. This is affecting companies that rely on trucks for freight, which deliver about 70% of the freight shipped in the US. The blockade of the Strait of Hormuz is also having an impact on agricultural prices due to the blockage of urea and ammonia, used to make nitrogen fertilizer.