Walmart Beats Profit Expectations But Shares Drop 6% on Weak Outlook and Cooling U.S. Growth

A surge in second-quarter profitability failed to protect Walmart stock from a 6% pre-market drop Thursday, as America’s largest retailer issued understated guidance alongside its weakest domestic sales growth in six years.

Same-store sales across U.S. locations—a crucial performance indicator tracking established retail sites and integrated digital channels—expanded by 2.6% for the second quarter, marking a deceleration from the 4.1% rate recorded in the preceding quarter.

When stripping out the health and wellness sector housing retail pharmacies, domestic comparable sales grew 3.4% during the second quarter. Management attributed the headwind to federal legislation capping out-of-pocket costs for select expensive Medicare medications, though the adjusted figure still lagged behind the 3.8% growth forecasted by FactSet analysts.

Federal legislative mandates altering Medicare drug pricing have restructured profit dynamics across major pharmacy chains and mass merchants, forcing retailers to absorb diminished margins on high-value prescriptions even as overall store foot traffic remains stable.

Digital sales within the domestic market, a crucial driver powering recent growth at the retail giant, advanced 24%, moderating slightly from the 26% bump delivered in the first quarter.

As one of the earliest major retail chains to publish second-quarter financial reports, the company’s performance provides analysts and macroeconomists fresh insight into whether escalating cost burdens linked to the conflict in Iran are altering household shopping habits.

Industry observers treat the company as a key gauge for broader consumer sentiment because of its massive market reach, with internal corporate figures indicating that more than 150 million shoppers visit its brick-and-mortar stores or digital platform weekly.

The quarterly readout carries added weight following Friday’s economic data indicating unexpectedly muted U.S. retail sales for July, alongside a University of Michigan survey showing mounting economic gloom among households coping with persistent price inflation across fuel, food, and basic necessities.

FactSet historical metrics confirm that the latest quarterly performance represents the company’s lowest comparable store sales increase since the 1.9% gain logged during the quarter ending Jan. 31, 2020.

High living costs have nonetheless expanded the company’s reach into affluent demographics, with market share expansion accelerating most rapidly among households making more than $100,000 annually.

For the three months ending July 31, net income climbed to $6.37 billion, or 80 cents per share. On an adjusted basis, earnings per share came in at 81 cents, surpassing the 74 cents expected by Wall Street consensus tracked by FactSet.

Total quarterly revenue increased 5.9% to $187.94 billion, coming in higher than the $186.62 billion anticipated by FactSet consensus estimates.

Looking ahead to the third quarter, corporate guidance projects per-share earnings between 62 cents and 64 cents alongside revenue expansion of 3% to 3.5%, translating to $184.88 billion to $186.23 billion in sales. Both targets miss FactSet consensus metrics, which pointed to 68 cents per share on sales reaching $188.19 billion.

For the full fiscal year, executives projected earnings per share between $2.80 and $2.87 on sales growth of 4% to 5%, trailing Wall Street consensus estimates of $2.90 per share and $752.06 billion in annual revenue.

That updated corporate outlook places final annual sales in the range of $741.7 billion to $748.8 billion, establishing a lower revenue ceiling as management plans for muted spending momentum across retail divisions.