Walmart reported on Thursday its slowest quarterly comparable sales growth in six years and warned that consumers are likely being squeezed by high gasoline prices, deepening concerns that American shoppers are under growing strain.
The retailer raised its annual sales and profit forecasts and said aggressive price cuts would boost demand later this year, but investors were not convinced.
Walmart shares fell as much as 10%, hitting a nine-month low of $102.85, before closing the trading session down more than 9%. The company's market value dropped by more than $80 billion, its steepest one-day decline since May 2022.
Walmart, the world's largest retailer by revenue, is known for its low prices on food and essential goods, a strategy that has helped it stay well ahead of competitors.
But the price cuts on 11,000 products, announced Wednesday, August 19, will be funded in part by $2.9 billion in tariff refunds, a one-time benefit and a strategy also being adopted by rivals including Target.
Brian Jacobsen, chief economic strategist at Annex Wealth Management, said that for the consumer economy, the report was comparable to Nvidia announcing a slowdown. He said Walmart had been benefiting from shoppers trading down to cheaper products, but that momentum may now be fading.
Other signs point to weaker demand. US retail sales fell unexpectedly in July, while gasoline prices have remained elevated for months. President Donald Trump warned consumers last week that fuel prices could stay high while the war in Iran continues.
Walmart now expects a $2 billion increase in fuel-related costs, above its previous forecasts. Chief Financial Officer John David Rainey told analysts on a conference call that when gasoline prices rise above $4, there may be a psychological impact, and that consumers are making difficult choices.
Customer traffic growth in stores slowed to 1.5% over the past three months, compared with 3% in the first quarter.
Betting on a Price War
Walmart executives asked for patience, arguing that the benefits of the price cuts, mainly on food and general merchandise, will take time to show up in results.
Rainey said Wall Street should view the company's second- and third-quarter results as a single unit, while Chief Executive John Furner said a rise in unit sales would translate into market share gains over time.
Economic downturns are exactly the moments Walmart's business model was designed to win, and some analysts and investors believe the retailer remains best placed to prevail in a price war.
Sarah Henry, managing partner at Logan Capital Management, a Walmart shareholder, said the company's main strength is being the lowest-cost supplier, and that the price cuts should keep customers coming back.
Walmart is also leaning on other strategies to keep prices low, including its high-margin advertising arm, Walmart Connect, whose sales rose 43% from a year earlier. Membership revenue grew 17%.
Comparable sales rose just 2.6%, missing analyst expectations of a 3.8% increase, according to data compiled by LSEG. Growth was 3.4% excluding the pharmacy segment, which was hurt by lower negotiated prices under the Maximum Fair Price program created by the Inflation Reduction Act.
Walmart shares have more than doubled since the start of 2024, fueling debate over whether the company is overvalued. UBS analyst Michael Lasser said the report is likely to sharpen that debate, but that he remains optimistic on the stock.
E-commerce was a bright spot, with sales up 24%. The company said it had doubled the number of orders delivered in under 30 minutes compared with a year earlier.
A Rare Miss
The report marks a rare stumble for a retailer with a reputation for consistently beating sales expectations and raising its forecasts. It was the first time in at least five years that Walmart's comparable store sales fell short of analyst expectations.
Average ticket value, or spending per transaction, rose 1.1%, compared with a 3.1% increase a year earlier.
Walmart now expects net sales growth of between 4% and 5% for fiscal year 2027, up from its previous target of 3.5% to 4.5%. The company expects annual adjusted earnings per share of between $2.80 and $2.87, compared with a previous target of $2.75 to $2.85.
For the third quarter, Walmart forecasts adjusted earnings per share of between 62 and 64 cents, below the 68-cent estimate analysts had expected.
