Walmart Stock Plunges 9% as Six-Year-Low Sales Growth Overshadows Earnings Beat

Key Takeaways

• Walmart stock closed 9.2% lower at $103.84 after US comparable sales rose 2.6%, missing the 3.8% market forecast.
• Quarterly revenue increased 5.9% to $187.9 billion, while adjusted earnings reached $0.81 per share.
• Walmart raised its full-year guidance, but slowing store traffic and a cautious third-quarter outlook intensified concerns about US consumer spending.

Walmart stock suffered its steepest one-day decline in more than four years on Thursday, August 20, after the world’s largest retailer reported its weakest US comparable sales growth in six years.

Shares fell as much as 10% to a nine-month low of $102.85 before closing 9.2% lower at $103.84. The sell-off erased more than $80 billion from Walmart’s market value and marked its largest daily decline since May 2022.

The reaction came despite Walmart beating quarterly revenue and earnings expectations and raising its full-year forecast. Investors instead focused on slowing store traffic, softer spending per transaction and signs that high fuel costs are forcing American households to reduce discretionary purchases.

Walmart’s Q2 earnings beat expectations

Walmart generated total revenue of approximately $187.9 billion in its fiscal second quarter, representing annual growth of 5.9%. Adjusted earnings reached $0.81 per share, around 9% above the market consensus.

Operating income increased 28.8%, while adjusted operating income rose 17.4% on a constant-currency basis. However, the reported increase received a substantial boost from a $2.9 billion refund linked to previously imposed emergency tariffs.

Net income declined 9.4% to $6.37 billion, highlighting the difference between Walmart’s underlying business performance and some of the temporary benefits included in its operating results.

The retailer also raised its fiscal 2027 outlook. Net sales are now expected to grow between 4% and 5%, compared with the previous forecast of 3.5% to 4.5%. Adjusted earnings are projected at $2.80 to $2.87 per share, up from the earlier range of $2.75 to $2.85. Walmart’s official earnings release confirmed that the company also delivered $19.7 billion in operating cash flow and $5.5 billion in free cash flow.

These headline figures would normally support Walmart stock. However, the details revealed a meaningful slowdown in the company’s core US retail operation.

US comparable sales growth falls short

Walmart US comparable sales, excluding fuel, increased only 2.6% during the quarter. That was below the 3.8% increase anticipated by analysts and represented the company’s slowest quarterly comparable sales growth in six years.

It was also Walmart’s first same-store sales miss in at least five years. Comparable sales had risen 4.1% in the previous quarter, making the latest slowdown particularly noticeable.

Part of the weakness came from Walmart’s pharmacy business. Lower prescription drug prices introduced under the Inflation Reduction Act’s Maximum Fair Price programme reduced comparable sales growth by approximately 1.25 percentage points. Excluding that effect, comparable sales would have increased by around 3.4%, although that still fell short of expectations.

Customer traffic growth slowed to 1.5% from 3% in the previous quarter. Average spending per transaction increased just 1.1%, compared with growth of 3.1% a year earlier.

These figures suggest that consumers are still visiting Walmart but are becoming more selective about what they purchase. Higher-income households continued to support demand for groceries, clothing and toys, while lower-income shoppers showed greater sensitivity to fuel and household expenses.

Higher fuel prices pressure US consumers

Persistently, high petrol prices emerged as a major source of pressure. Walmart now expects its annual fuel expenses to be approximately $2 billion higher than previously forecast.

When petrol prices remain above $4 per gallon, households have less disposable income for general merchandise and other non-essential products. The effect is especially significant for Walmart’s lower-income customers, who typically spend a larger proportion of their income on transport, food and housing.

Recent US retail sales data have also indicated weaker consumer demand. Walmart’s scale and exposure to everyday household purchases make its results an important signal for the broader US economy.

The slowdown may therefore reflect more than company-specific execution. It raises the possibility that consumer spending is losing momentum as elevated energy costs and economic uncertainty force households to make greater trade-offs.

Walmart uses a $2.9 billion tariff refund to cut prices

Walmart received almost $2.9 billion in tariff refunds during the quarter and is using much of the windfall to reduce prices rather than retain the entire benefit as profit.

The retailer implemented more than 11,000 price rollbacks during the quarter, concentrating on groceries and general merchandise. Management expects these reductions to support unit sales and help Walmart gain market share during the second half of the year.

The strategy could strengthen Walmart’s competitive position, particularly if consumers continue searching for lower prices. However, it also creates uncertainty about short-term margins because the tariff refund is a one-off benefit, while lower prices could remain in place for longer.

Investors may have expected the refund to produce a larger earnings upgrade. Instead, Walmart’s third-quarter adjusted earnings forecast of $0.62 to $0.64 per share fell below the market estimate of approximately $0.68.

That cautious near-term outlook helped explain why the stronger full-year forecast failed to prevent the sharp decline in Walmart shares.

E-commerce and advertising remain growth engines

Walmart’s digital operations provided a clear bright spot. Walmart US e-commerce sales increased 24%, while store-fulfilled delivery grew 40%. The retailer also doubled the number of products delivered in under 30 minutes compared with a year earlier.

E-commerce now represents approximately 23% of Walmart US sales. This growing contribution makes the distinction between online and physical-store performance increasingly difficult because stores also function as fulfilment centres for digital orders.

Higher-margin businesses continued to expand rapidly. Walmart Connect advertising revenue rose 43%, global advertising revenue increased 38%, and membership fee revenue grew 17%. Walmart International also recorded constant-currency net sales growth of 7.9%.

These businesses are important because their margins tend to be higher than those generated through traditional grocery and merchandise sales. Continued expansion in advertising, marketplace services, membership and fulfilment could help offset some of the pressure created by aggressive retail price reductions.

What could move Walmart stock next?

Investors will closely monitor whether Walmart’s price cuts produce stronger customer traffic and higher unit sales during the third quarter. Management has indicated that the second and third quarters should be assessed together because the benefits of recent price reductions may take time to appear.

Fuel prices will remain another significant variable. A decline in petrol costs could release more disposable income for Walmart customers, while persistently elevated prices could prolong the slowdown in discretionary spending.

The company’s third-quarter earnings range will also face scrutiny. Results above the projected $0.62–$0.64 range could restore confidence in Walmart’s ability to convert sales growth into profit. Further weakness in comparable sales or store traffic, however, could intensify questions about consumer resilience and the valuation of Walmart stock, which had more than doubled since the beginning of 2024. Market reaction and operating data showed that investors are now demanding clearer evidence that digital growth and price investment can offset the slowdown in physical-store spending.