Walmart Q2 beat tempered by slower U.S. sales

Retail store interior with sparse shoppers reflecting mixed Q2 results and slower U.S. sales for WMT

Key Points

01Q2 sales rose 5.9% to $187.94 billion, topping forecasts
02Adjusted EPS of $0.81 came in above the $0.74 consensus
03U.S. comparable sales grew 2.6%, the weakest pace in more than six years
04Shares slid after results and helped pull major U.S. indexes lower

Walmart’s Q2 results top estimates

Walmart’s (WMT) latest fiscal second-quarter report showed growth in both sales and profit that exceeded analyst expectations. Total sales for the quarter rose 5.9% to $187.94 billion. Quarterly net income was $6.37 billion, or $0.80 per share, and adjusted earnings per share were $0.81, above Wall Street expectations of about $0.74. The performance reflected continued customer demand across the retailer’s broad merchandising base.

The company highlighted ongoing strength in digital channels. U.S. e-commerce sales grew about 24% in the quarter, underscoring the role of online and omnichannel offerings in driving overall revenue. Management also pointed to market share gains in key categories alongside the topline increase.

Slowest U.S. comparable sales growth in six years

Despite the revenue and earnings beat, Walmart’s (WMT) U.S. comparable sales growth slowed notably. Comparable sales at U.S. stores rose 2.6% in the quarter, described as the weakest pace in more than six years. This moderation contrasted with the stronger growth rate implied by overall sales and highlighted a softer trend in in-store performance.

The health and wellness business weighed on these figures. Walmart reported that pricing changes in health and wellness, influenced by regulatory price caps on certain drugs, acted as a headwind to comparable sales. Excluding that category, U.S. comparable sales increased 3.4%, indicating firmer underlying demand in other areas of the business.

Guidance raised for the full year, cautious for Q3

Management updated its outlook following the quarter. For the third quarter, Walmart projected adjusted earnings per share in the range of $0.62 to $0.64. It also forecast sales growth for the period below some analyst expectations, signaling a more measured near-term view even after the strong second-quarter headline results.

For the full fiscal year, Walmart raised its guidance. The company now expects adjusted earnings per share between $2.80 and $2.87 and anticipates sales growth of about 4% to 5%. This outlook suggests the retailer still sees solid momentum for the year as a whole, despite recent pressure in specific categories such as health and wellness.

Market reaction and broader index moves

Walmart’s update prompted a negative reaction in financial markets. Shares fell about 6% in premarket trading prior to the opening bell after the company reported its results and guidance. Investors appeared to focus on the slowdown in U.S. comparable sales and the cautious tone around near-term growth.

The stock’s decline had an immediate effect on major U.S. benchmarks. At the U.S. open, the S&P 500 (SPX) fell about 0.3%, and futures and early trading in the Nasdaq 100 (NDX) also moved lower. The drop in Walmart shares was one factor weighing on these indexes as markets digested both the company’s mixed signals of earnings strength and moderating U.S. sales growth.

Key Takeaways

01Walmart is balancing strong overall sales and EPS outperformance against a visible deceleration in U.S. comparable-store growth.
02Regulatory-driven pricing changes in health and wellness are materially affecting reported comps, masking somewhat stronger trends elsewhere in the U.S. business.
03Raised full-year guidance alongside cautious third-quarter projections signals confidence in the broader year while acknowledging near-term pressures.
04The sharp share price decline and drag on major indexes show that investors are highly sensitive to signs of slowing core U.S. growth, even when headline results beat expectations.

References