Walmart has warned that higher fuel prices, driven by the ongoing conflict in the Middle East, are causing U.S. consumers to cut spending elsewhere. The retail giant expects its sales growth to slow significantly in the coming months, with the average price of a gallon of petrol reaching $4.56, up from $3 before the war. John David Rainey, Walmart’s chief financial officer, said rising fuel costs are putting pressure on lower-income shoppers, while higher-income consumers continue spending confidently.
Walmart absorbed $175 million in higher fuel costs in the first quarter, taking a hit to profits rather than raising prices. The company reported a 7.3% increase in sales to $177.8 billion, but profits rose 18.8% to $5.3 billion. However, Walmart expects growth to slow to between 4% and 5% in the next quarter as fuel prices remain high.
Rainey noted that higher tax refunds from President Trump’s One Big Beautiful Bill Act (OBBBA) had temporarily offset some of the pressure, but that effect is fading. If the Strait of Hormuz remains closed, Walmart may have to raise food prices due to shortages of fertilizers. The retailer is also seeing a shift in consumer behavior, with lower-income shoppers becoming more budget-conscious and higher-income shoppers gravitating toward premium services.
Walmart’s gas stations report that customers are filling up with fewer than 10 gallons per trip for the first time since 2022, signaling financial strain. The company plans to keep prices low to attract more shoppers but may raise prices later if fuel costs persist. Meanwhile, rival retailers like Home Depot, Target, and Lowe’s have also reported sales growth, with retail spending in April surpassing inflation.
Walmart’s shares fell more than 7% after the earnings report, as investors reacted to the lower-than-expected guidance for the second quarter. The retailer remains a key indicator of U.S. consumer health, with its decisions on pricing and spending likely to ripple through the broader economy.