Walmart spooks the street

This bellwether is ringing alarm bells.

Walmart reported Q2 earnings this morning—and let’s just say that the results did not make investors feel like they were saving money or living well. While the company beat Wall Street estimates on revenue and earnings, same-store sales rose just 2.6%—lower than analyst expectations of 3.8%, and the smallest quarterly increase since 2020. According to executives, the culprit was new pharmacy-pricing regulations—without those, sales would have gotten a 3.4% boost.

Shares sank 9.16% this afternoon, making today Walmart’s worst day of trading in four years.

But despite the share meltdown, it wasn’t all bad news:

• The company received $2.9 billion in tariff refunds last quarter, and is waiting to receive another $100 million. CFO John Rainey said Walmart will use those funds to lower prices for consumers next quarter.
• Looking ahead, Walmart expects net sales to jump between 4% and 5% for the fiscal year, slightly higher than the 3.5% to 4.5% it previously projected.

Consumers are cash-strapped

The rough quarter for Walmart speaks to a larger trend that analysts are observing—and one we’re all living. Amid persistent inflation and a weakening labor market, many consumers are feeling strapped for cash, and aren’t exactly eager to shell out for things like a silicon bacon cooker or pickle ice pops.

Rainey acknowledged on CNBC that consumers were feeling economic pain, which weighed on the company’s quarter. But, he added, “Consumers are still spending, and real wage growth is keeping pace, and so they’ve been very resilient in this environment.”

Despite today’s mixed news, analysts are still bullish on the company in the long term. In a note last week ahead of the earnings call, Bank of America analyst Christopher Nardone praised fast-growing segments of Walmart’s business, including e-commerce and global advertising.

His predictions seemed spot on: Walmart’s global e-commerce revenue surged 23% last quarter, while its advertising revenue popped 38%.

After dealing with worrying macro data for so long, maybe investors are unfairly taking out their anxiety on Walmart.—LB