Walmart’s stock fell nearly 10% on Thursday after the company reported its second-quarter earnings, despite beating revenue and earnings estimates and raising full-year guidance. The decline contributed to losses across major U.S. stock indexes, with the S&P 500 down 0.29%, the Dow Jones Industrial Average down 0.64%, and the Nasdaq Composite down 0.80% by midday trading.
The retail giant’s U.S. comparable sales growth of 2.6%—the slowest pace since Q4 2020—fell short of analyst expectations of roughly 3.7%, signaling weaker consumer demand. Walmart attributed the slowdown in part to new federal drug pricing rules and rising fuel costs, which have led customers to make trade-offs in spending.
Walmart’s $2.9B tariff refund drives price reductions
Walmart received nearly $2.9 billion in tariff refunds, which the company has directed toward lowering prices on groceries and general merchandise. CEO John Furner stated that the company is prioritizing affordability amid consumer pressure, noting that "customers are feeling some pressure, so we're proud of our investments." The refunds contributed to a nearly 30% increase in operating income compared to the same period last year.
CFO John David Rainey highlighted that June saw more pronounced trade-offs in spending as average gas prices exceeded $4 per gallon in the U.S. He added that the company’s shift toward digital sales—where orders are fulfilled by store teams—has also impacted in-store revenue.
Market reaction overshadows strong financials
While Walmart’s revenue rose 5.9% year-over-year to $187.9 billion, the stock’s 9.8% drop erased over $80 billion in market value, pushing the company out of the $1 trillion market cap club. Analysts noted that the tariff refund, though significant, did not offset concerns about slower sales growth and higher operational costs, including over $2 billion in added fuel expenses due to global oil price volatility.
Broader economic implications
Walmart’s earnings report is closely watched as a bellwether for U.S. consumer health, given that consumer spending accounts for nearly 70% of GDP. The company’s results suggest that households are adjusting spending habits in response to inflation and economic uncertainty, with July’s inflation rate at 3.4%—up from 2.4% before recent geopolitical tensions.
Retail analyst Neil Saunders of GlobalData Retail noted that Walmart’s price cuts are part of its strategy to maintain its "Everyday Low Price" positioning, though the broader slowdown in sales growth raises questions about long-term consumer resilience.
Comparative outlook: Target’s contrasting performance
Walmart’s decline contrasts with Target’s earnings report, which beat expectations despite receiving a $994 million tariff refund—a smaller but proportionally more impactful figure. Target’s U.S. comparable sales grew 3.8%, outperforming Walmart’s 2.6%, and its stock rose as investors focused on its core operational strength rather than the refund.
Key takeaways
- Walmart’s earnings beat and raised guidance were overshadowed by weaker-than-expected sales growth and a 10% stock plunge.
- The company is using $2.9 billion in tariff refunds to lower prices, particularly on groceries and essentials.
- Rising fuel costs and new drug pricing rules are cited as factors in the slowdown in consumer spending.
- The market’s reaction reflects concerns about long-term consumer demand despite strong headline financials.