Walmart reported its slowest growth in U.S. comparable sales in six years during its latest quarter, prompting a 6% drop in company shares before Thursday’s opening bell.
In the second quarter, U.S. comparable sales, which include online sales tied to stores that have been open for at least a year, rose 2.6%. This marks a decrease from the 4.1% rise in the previous quarter. When excluding Walmart’s wellness category, which is affected by federal legislation capping prices of some high-cost Medicare drugs, comparable sales increased by 3.4%. However, according to FactSet, this still fell short of analysts’ expectations of a 3.8% increase.
Walmart’s U.S. e-commerce sales, a key growth driver for the company, grew 24% in the second quarter. This was slightly slower than the 26% growth seen in the first quarter. As one of the initial major retailers to report second-quarter results, Walmart provides insight into consumer responses amid ongoing price pressures influenced by geopolitical events, such as the conflict in Iran.
Due to its extensive customer base, Walmart serves as an indicator of consumer spending trends. The retailer reports over 150 million weekly visits to its website and stores. Recent data has shown that U.S. retail sales were unexpectedly weak in July, reflecting a growing consumer pessimism about the economy amid rising costs for essentials like gas and groceries.
Walmart’s recent figures show the smallest gain in comparable store sales since January 2020, which registered a 1.9% gain. This has helped Walmart expand its customer base, especially capturing a larger market share among wealthier customers with annual incomes over $100,000.
In terms of financial performance, Walmart’s net income for the quarter ending July 31 was $6.37 billion, or 80 cents per share. Adjusted earnings per share were 81 cents, exceeding Wall Street’s estimate of 74 cents, according to FactSet. The company’s sales rose 5.9% to $187.94 billion, which was above analysts’ predictions of $186.62 billion.
Looking ahead to the third quarter, Walmart forecasts earnings per share between 62 cents and 64 cents, with sales growth of 3% to 3.5%. This sets an expected sales range of $184.88 billion to $186.23 billion, which is below analysts’ expectations of 68 cents per share and sales of $188.19 billion, per FactSet.
For the full fiscal year, Walmart anticipates earnings per share ranging from $2.80 to $2.87, with sales expected to increase between 4% and 5%. This projects annual sales in the range of $741.7 billion to $748.8 billion. Analysts, however, had expected $2.90 per share and sales of $752.06 billion for the year, according to FactSet.