Walmart missed quarterly comparable sales expectations for the first time in at least five years on Thursday as shoppers pulled back on spending in the face of rising gas prices, sending its shares down 6% in premarket trading.
The world's largest retailer, however, slightly raised its annual sales and profit targets for the first time this year, with CEO John Furner pointing to growth in its e-commerce division.
The results offer a key read on the retail bellwether's ability to attract price-sensitive shoppers, who are prioritizing groceries and other essentials over discretionary spending ahead of the back-to-school and holiday seasons.
Sales trends, traffic and pricing actions
The company's second-quarter U.S. same-store sales rose 2.6%, compared with estimates of a 3.8% increase, according to data compiled by LSEG. Average ticket, or spending per transaction, grew 1.1%, well below a 3.1% rise a year ago.
The report was unusual for Walmart, which has a track record of lifting forecasts during the year and comfortably beating comparable sales estimates.
"For the consumer economy, this is like Nvidia posting a slowdown. Walmart has been winning the trade-down trade, but that tailwind may be fading," said Brian Jacobsen, chief economic strategist at Annex Wealth Management.
Store traffic growth slowed to 1.5% in the latest three months from 3% in the first quarter.
That was the bigger concern for investors, and the number they will be closely watching in the current quarter, Melius Research analyst Jacob Aiken-Phillips said.
"Walmart is spending real money on price and has not yet gotten a trip acceleration in its largest business. That is the number that has to improve in 3Q, and it is a higher bar than the comp itself," the analyst said.
Walmart said on Thursday that it would continue to direct the tariff refunds it received into lowering prices. Its adjusted operating income included a 750-basis-point benefit from tariff refunds.
The retailer lowered prices on more than 11,000 items in the second quarter, following about 7,000 cuts in the first quarter. It has supported margins through lucrative side businesses such as advertising and a growing third-party marketplace.
Forecasts raised despite cautious third-quarter outlook
Walmart now expects fiscal 2027 net sales to grow between 4% and 5%, compared with its earlier target of growth between 3.5% and 4.5%.
It now expects annual adjusted earnings per share of between $2.80 and $2.87, compared with its earlier target of between $2.75 and $2.85. Its quarterly earnings per share of 81 cents beat estimates by 7 cents.
It expects third-quarter adjusted earnings per share of between 62 cents and 64 cents, below estimates of 68 cents, while its net sales growth target of 3% to 3.75% was also lower.
E-commerce and advertising gains offset pressure in stores
Walmart Connect, the U.S. advertising business, grew 43%, while its e-commerce sales increased 24%.
However, growth rates in these businesses, while impressive, were not enough, Annex Wealth's Jacobsen said. "The bread and butter of the company is still in-store and in-person shopping."
Sales dropped in its U.S. pharmacy business, as lower prices negotiated under the Inflation Reduction Act's Maximum Fair Price program reduced the amount consumers spent on each visit.
Excluding the impact from the act, core U.S. comparable sales rose 3.4%, its slowest pace since the first quarter of 2022.
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