Walmart Stock Plunges 9% as Six-Year-Low Sales Growth Overshadows Earnings Beat

Key Takeaways

• Walmart stock closed 9.2% lower at $103.84 after US comparable sales rose 2.6%, missing the 3.8% market forecast.
• Quarterly revenue increased 5.9% to $187.9 billion, while adjusted earnings reached $0.81 per share.
• Walmart raised its full-year guidance, but slowing store traffic and a cautious third-quarter outlook intensified concerns about US consumer spending.

Stock Performance

Walmart stock experienced its steepest one-day decline in over four years, dropping as much as 10% to a nine-month low of $102.85 before closing at $103.84. This sell-off erased more than $80 billion from Walmart’s market value, marking its largest daily decline since May 2022.

Quarterly Earnings Overview

Walmart reported total revenue of approximately $187.9 billion in its fiscal second quarter, representing a 5.9% annual growth. Adjusted earnings reached $0.81 per share, exceeding market consensus by around 9%. Operating income increased by 28.8%, with adjusted operating income rising 17.4% on a constant-currency basis. However, net income declined by 9.4% to $6.37 billion, indicating a disparity between underlying business performance and temporary benefits included in operating results.

US Comparable Sales Growth

Walmart's US comparable sales, excluding fuel, increased only 2.6% during the quarter, falling short of the 3.8% increase anticipated by analysts. This marked the company's slowest quarterly comparable sales growth in six years and its first same-store sales miss in at least five years. The pharmacy business contributed to this weakness, with lower prescription drug prices reducing comparable sales growth by approximately 1.25 percentage points.

Impact of Fuel Prices

Persistently high petrol prices emerged as a significant pressure point for consumers. Walmart now expects its annual fuel expenses to be approximately $2 billion higher than previously forecast. High fuel prices limit disposable income for non-essential products, particularly affecting lower-income customers who spend a larger proportion of their income on transport and essentials.

Strategic Price Reductions

Walmart received nearly $2.9 billion in tariff refunds during the quarter, which it is using to implement over 11,000 price rollbacks, particularly on groceries and general merchandise. This strategy aims to support unit sales and enhance market share, although it raises concerns about short-term margins due to the one-off nature of the tariff refund.

E-commerce and Advertising Growth

Walmart's digital operations showed strong growth, with US e-commerce sales increasing by 24% and store-fulfilled delivery growing by 40%. E-commerce now accounts for approximately 23% of Walmart US sales. Additionally, higher-margin businesses such as advertising and membership fees continued to expand, which could help offset pressures from aggressive retail price reductions.

Future Outlook

Investors will be closely monitoring whether Walmart's price cuts lead to stronger customer traffic and higher unit sales in the upcoming quarters. Fuel prices will remain a critical variable, as a decline could increase disposable income for customers. The company's third-quarter earnings forecast will also be scrutinized, with results above the projected range potentially restoring confidence in Walmart's ability to convert sales growth into profit.