Walmart Inc. (WMT) shares are sliding in Thursday's premarket session after the retail giant delivered a mixed bag of second-quarter results: a solid earnings beat, but a cautious outlook for the third quarter that left investors wanting more.
Walmart's US Sales Growth Slows to a Crawl, and Pharmacy Prices Are the Culprit
MarketDash
Walmart beat Q2 estimates but issued soft Q3 guidance, sending shares lower. Here's what's behind the slowdown.
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Walmart Earnings Snapshot
Walmart reported adjusted earnings of 81 cents per share, beating the consensus estimate of 74 cents. Sales reached $187.9 billion, topping the $186.8 billion estimate.
Global advertising revenue increased 38%, led by strength across segments. Global membership fee revenue rose 17% during the quarter.
Gross margin expanded 96 basis points year over year to 25.4%, led by Walmart U.S. and benefits from tariff refunds.
Adjusted operating income on a constant-currency basis increased 17.4%. Strong sales, higher gross margins, tariff refund benefits and global membership growth supported the increase.
Walmart ended the quarter with $11.5 billion in cash and cash equivalents and $57.2 billion in total debt.
Operating cash flow increased $1.4 billion to $19.7 billion. However, free cash flow declined $1.4 billion to $5.5 billion.
The company repurchased 42.3 million shares for $5.1 billion year to date.
Business Performance
Global e-commerce sales grew 23%, driven by store-fulfilled pickup and delivery and marketplace growth.
Walmart U.S. comparable sales increased 2.6%, driven by higher transactions. That was the retailer's smallest quarterly increase since 2020, The Wall Street Journal reported. Pharmacy deflation tied to new maximum fair price regulations, which took effect Jan. 1, created a 125-basis-point headwind to comparable sales.
The report added that CFO John David Rainey played down the importance of store comparable sales, noting that stores increasingly serve as digital fulfillment hubs for online orders and delivery.
Walmart International sales rose 7.9% on a constant-currency basis, supported by growth in e-commerce and stores.
Sam's Club U.S. sales increased 8.8%, helped by higher transactions and unit volumes. Grocery and general merchandise showed strength.
Inventory increased $3.9 billion, or 6.7% year over year, to $61.6 billion. Inventory rose 6% on a constant-currency basis.
Walmart Outlook
During the conference call, Walmart executives said the company rolled back prices on 11,000 items in the U.S. during the second quarter. The retailer also continues to see growth from higher-income households.
Executives said the annual forecast assumes slightly stronger second-half sales than previously expected, driven by price investments.
The forecast also assumes fuel prices and tariffs remain at current levels. Walmart began increasing the number of price rollbacks in late July and said it is pleased with the start of the back-to-school season.
Walmart raised its fiscal 2027 adjusted EPS outlook to $2.80-$2.87 from $2.75-$2.85. The consensus estimate is $2.90.
The company raised its fiscal 2027 sales outlook to $734.656 billion-$741.720 billion from $731.124 billion-$738.188 billion. The consensus estimate is $752.250 billion.
For the third quarter, Walmart expects adjusted EPS of 62 cents-64 cents, below the 68-cent estimate. It forecasts sales of $183.134 billion-$184.468 billion, compared with the $188.339 billion estimate.
WMT Price Action: Walmart shares were down 7.71% at $105.49 during Thursday's premarket session, according to market data.
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