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If you only glanced at Walmart’s stock today and saw that shares sank 4.49%, you might think the biggest company in the US by revenue just reported a rough second quarter.
There is a fair reason for that reaction: The company missed profit forecasts for the first time in three years, reporting EPS of $0.68 per share, below the $0.74 Wall Street expected. On top of that, management acknowledged that tariff costs have forced the retailer to raise the prices of some products. Roughly a third of Walmart’s merchandise is imported from overseas.
However, Walmart’s earnings miss isn’t actually as bad as it looks. Its lower profit had a lot to do with legal charges, insurance, claims, and restructuring costs—not systemic problems with Walmart’s business itself.
In fact, when you look under the hood at how things are really going, the retail giant is killing it. The company raised its full-year guidance on top of upping forecasts for the current quarter, with management crediting a “resilient” consumer amid a broader economic slowdown and threats of tariffs.
Walmart has the data to back up that sentiment: Comparable sales jumped 4.6% last quarter, beating analysts’ forecasts of roughly 4%. The company credited its markdowns on groceries, fast shipping, and new styles for the growth. Comparable sales for its Sam’s Club brand increased 5.9% (excluding fuel), outpacing analyst projections of 5.2%.
Good news for the consumer? Walmart is often thought of as a bellwether because its huge customer base means it can act as a gauge of how the American consumer is feeling. Walmart’s strong revenue comes at a time when competitors like Target have been struggling to boost their own lukewarm sales numbers, as cost-conscious consumers turn toward Walmart’s value-focused business, and snub retailers focused on premium offerings.
Walmart’s secret weapon
If you thought comparable sales growth was impressive, just look how Walmart is doing online: E-commerce sales jumped 26% domestically and 25% globally. Its global ads business is also raking in the cash: Revenue there increased 46% year over year, while sales from its US-based ad venture, Walmart Connect, shot up 31%.
Overall, the vast majority of analysts covering Walmart have a “buy” rating on the stock.
Looks like today's decline might just be one more discount.—LB