TLDR
- Walmart stock dropped 3-4% after Q2 earnings missed expectations at $0.68 per share vs $0.74 forecast
- Revenue beat estimates at $177.4 billion, up from $169.3 billion year-over-year
- Company raised full-year sales guidance to 3.75%-4.75% growth from previous 3%-4%
- Rising costs from tariffs, insurance claims, and litigation are squeezing profit margins
- E-commerce business continues double-digit growth while grocery and health categories drive US sales
Walmart shares tumbled over 3% in pre-market trading Thursday after the retail giant reported second-quarter earnings that fell short of Wall Street expectations. The world’s largest retailer posted adjusted earnings per share of $0.68, missing analyst forecasts of $0.74.
Despite the earnings disappointment, Walmart delivered on the revenue front. The company reported quarterly revenue of $177.4 billion, beating the Street’s $176.05 billion estimate and marking a jump from $169.3 billion in the same period last year.
The mixed results highlight a tale of two narratives for Walmart investors. Strong top-line growth and continued digital momentum paint one picture. Rising costs squeezing profit margins tell another story entirely.
Walmart’s US same-store sales grew 4.6% in the quarter, outpacing Wall Street’s 4.2% prediction. The company’s wholesale club Sam’s Club posted even stronger growth at 5.9%, beating forecasts of 5.3%.
CEO Doug McMillon attributed the performance to innovation and execution. “The top-line momentum we have in our business comes from how we’re innovating and executing,” McMillon said in the earnings release.
Tariff Pressures Mount
The company is feeling the pinch from multiple cost pressures. Tariffs, insurance claims, litigation settlements, and restructuring costs are all weighing on margins.
Walmart has chosen to absorb higher import duties rather than fully pass them on to customers. This strategy protects consumers but comes at the expense of profitability.
McMillon had warned analysts in May that the company couldn’t absorb all tariff pressure given retail’s narrow margins. He noted that tariff-related price increases had already occurred in April and May.
Bank of America estimates Walmart imports roughly 15% of its US sales from China. Around 60% of US sales come from groceries, which are largely tariff-exempt if produced domestically or in Mexico and Canada.
The company reported “like-for-like” inflation of 1.1% in its US stores during the quarter. This relatively modest figure suggests Walmart has managed to keep price increases in check for now.
Digital Growth Continues
Walmart’s e-commerce segment delivered another quarter of double-digit growth. This performance helps the company maintain its competitive position against Amazon in the online retail space.
The company saw strength across multiple categories. Grocery sales rose by mid-single digits in US stores. The health and wellness category posted even stronger growth with mid-teens percentage increases.
Walmart gained market share “across income brackets led by upper-income households” in its US operations. This demographic expansion shows the retailer’s appeal beyond its traditional customer base.
Despite the earnings miss, Walmart raised its full-year outlook. The company now expects net sales growth between 3.75% and 4.75% for fiscal 2026, up from its previous 3%-4% forecast.
Adjusted earnings per share guidance received a slight bump to $2.52-$2.62 from the prior range of $2.50-$2.60. For the current quarter, Walmart expects adjusted earnings per share between $0.58-$0.60.
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