Walmart raised its full-year financial outlook after beating Wall Street expectations for revenue and earnings, but shares fell 9% as investors reacted to slower U.S. same-store sales growth.
The world’s largest retailer reported revenue of $187.9 billion, representing nearly 6% growth and exceeding the approximately $186 billion expected by analysts. Adjusted earnings per share reached $0.81, ahead of the $0.74 consensus estimate.
U.S. Same-Store Sales Slow Despite Strong Results
Despite the earnings beat, Walmart’s U.S. comparable sales increased 2.6%, below Wall Street expectations of 3.7%. This marked the slowest pace of U.S. same-store sales growth since the fourth quarter of 2020.
The slowdown was partly driven by lower drug prices, which affected the company’s health and wellness category following Medicare drug price negotiations. Excluding health and wellness, Walmart reported 3.4% comparable sales growth across its core merchandise business.
The company also noted that it was comparing against strong growth in GLP-1 medication adoption over the previous two years, which affected year-over-year comparisons.
Consumers Remain Price Sensitive
During the quarter, Walmart continued cutting prices across thousands of products, including grocery items such as beef, chips and soda, as it focused on attracting cost-conscious shoppers.
Walmart CFO John David Rainey said consumer behavior became more cautious as fuel prices increased above $4 per gallon, leading shoppers to make more trade-offs during the quarter.
Traffic and average transaction sizes were lower than expected. Grocery sales posted mid-single-digit growth, led by personal care, beauty and pet products, while general merchandise increased at a low single-digit pace.
E-Commerce Growth Remains Strong
Walmart’s e-commerce business continued to outperform, with online sales increasing 23% globally and 24% in the United States. The growth was likely supported by promotions designed to compete with Amazon’s Prime Day event.
Operating income increased approximately 21% year over year, supported by a 158-basis-point improvement in gross profit margins. The increase was driven partly by tariff refund benefits, although it was partially offset by price investments and higher fuel costs.
Walmart Updates Financial Forecast
For the third quarter, which includes the back-to-school shopping period and the beginning of holiday preparations, Walmart expects net sales growth between 3% and 3.75% and adjusted earnings per share between $0.62 and $0.64.
For fiscal year 2027, Walmart forecast revenue growth of 4% to 5% and adjusted earnings per share between $2.80 and $2.87. The outlook was more conservative than Wall Street expectations, which had projected nearly 5% revenue growth and earnings of approximately $2.97 per share.
The company included potential IEEPA tariff refunds in its guidance. Walmart said it could receive refunds equivalent to roughly 0.5% of annual U.S. sales, representing approximately $2.9 billion.
Walmart CFO John David Rainey said the company has received substantially all expected tariff refunds and plans to reinvest those funds into customer experience improvements, pricing initiatives, grocery and general merchandise categories.
