Walmart Stock Dips 9% as Wall Street Reacts to Disappointing Sales Outlook

Key Points:

• Walmart exceeded fiscal second-quarter sales expectations and increased its full-year forecast.
• The company expects to receive approximately $2.9 billion in tariff refunds, with nearly $100 million still outstanding, and plans to use these to lower prices for consumers.
• Strong growth was reported in e-commerce and membership programs for another consecutive quarter.

Walmart announced its fiscal second-quarter results, revealing sales that surpassed Wall Street's projections and an elevated full-year outlook, buoyed by robust e-commerce expansion and a significant benefit from tariff refunds.

CFO John David Rainey expressed confidence, stating, "Our business is strong... We feel really good about the progress we're making."

During the second quarter, Walmart's revenue climbed 5.9%, with global e-commerce sales surging by an impressive 23%. U.S. comparable sales saw a 2.6% increase, although this was partially tempered by a 0.8% headwind in the health and wellness sector due to the implementation of price caps on certain drugs. This comparable sales figure fell short of the 3.5% increase anticipated by Wall Street analysts.

In response to the results and guidance, Walmart shares experienced a notable decline of approximately 9% by the close of trading on Thursday, indicating Wall Street's apprehension regarding the comparable sales performance and the company's future sales projections.

Looking ahead to the third quarter, Walmart projects net sales growth between 3% and 3.75%, with adjusted earnings per share estimated to range from 62 cents to 64 cents.

For the full fiscal year, the retailer anticipates net sales to increase between 4% and 5%, an upward revision from its previous guidance of 3.5% to 4.5% growth. Adjusted earnings for the year are expected to be between $2.80 and $2.87 per share, compared to the earlier forecast of $2.75 to $2.85 per share.

Rainey disclosed that Walmart is eligible to receive about $2.9 billion in tariff refunds, with just under $100 million yet to be reimbursed. He confirmed that these funds will be channeled into reducing prices for consumers, with the impact expected to be noticeable in the third quarter.

However, the company also anticipates incurring over $2 billion in "incremental cost headwinds related to higher fuel prices this year."

These efforts to reduce prices come at a time when consumers are grappling with increased spending pressure from high fuel and food costs. Walmart's established reputation for value and its significant scale as the largest U.S. retailer typically position it well to navigate such economic conditions.

Rainey acknowledged that consumers remain financially stretched, particularly due to elevated gas prices. In response, Walmart is proactively lowering prices across various categories, including beef.

"But consumers are still spending, and real wage growth is keeping pace, and so they've been very resilient in this environment," Rainey commented. "But all that said, we would love to be able to bring prices down more and see less pressure on their wallets."

Walmart's financial performance for the fiscal second quarter:

• Adjusted Earnings Per Share: 81 cents (comparison to 74 cents expected was not immediately clear)
• Revenue: $187.94 billion (vs. $186.77 billion expected)

For the quarter ending July 31, Walmart reported a net income of $6.37 billion ($0.80 per share), a decrease from $7.03 billion ($0.88 per share) in the prior year. Adjusted earnings per share came in at 81 cents, after excluding investment losses and including a tax-related benefit. The gross profit rate improved to 25.4%, partly due to the tariff refund benefit.

Total revenue rose to $187.94 billion from $177.40 billion in the same period last year.

These results follow a period of sustained growth for Walmart, driven by its expanding pickup and delivery services, a growing third-party marketplace, and its advertising business. The company has been successful in attracting higher-income customers by enhancing shopping convenience and offering additional perks through its Walmart+ membership program, a direct competitor to Amazon Prime.

Walmart reported a 17% increase in companywide membership fee revenue, with Walmart+ achieving its highest net member additions for a second quarter. Sam's Club U.S. generated $25.7 billion in net sales, an 8.8% increase year-over-year, with membership fees climbing 6%.

Global advertising revenue saw a significant jump of 38%.

In the U.S., Walmart's net sales reached $125.2 billion, up from $120.9 billion year-over-year. International net sales were $35.2 billion, compared to $31.2 billion. Global inventory levels increased by 6.7% during the quarter, with a notable portion attributed to higher-priced and premium brands, reflecting market share gains among high-income consumers.

While the grocery segment experienced mid-single-digit growth, the health and wellness sector saw a low-single-digit decline. General merchandise revenue showed slight growth, driven by performance in toys, fashion, furniture, and private label products.