Walmart reported second-quarter revenue of $187.9 billion on Thursday, up 5.9% year on year and ahead of the roughly $186.75 billion analysts expected. Adjusted earnings came in at 81 cents a share against a 74-cent consensus. Global e-commerce sales rose 23%. The company raised its full-year outlook.
The stock fell about 7% before the open.
One number explains it. Walmart U.S. comparable sales grew 2.6%. The street was looking for something closer to 3.5%, and on some compilations 3.67%. For a business whose entire investment case rests on taking share from everyone else, a one-point comp miss is not a rounding error — it is the thesis.
Where the comp went
About 80 basis points of the shortfall came from a single place: health and wellness. New maximum fair price regulation on certain drugs took effect on 1 January, and pharmacy deflation now drags on the comparable line every quarter until it laps. That is policy showing up in a retailer’s same-store sales, and it does not go away because Walmart sells more groceries.
Add the 80 basis points back and the underlying comp is around 3.4% — roughly in line, and a very different story. The market chose not to add it back, which is a defensible position: the headwind is real cash, it is regulatory, and the pressure has been flagged as potentially running into fiscal 2028.
The growth that did show up came from the same places it has come from for two years. E-commerce up 23% globally. International. The stores themselves are growing slowly.
Our take: The tariff refund is the tell. CFO John David Rainey said Walmart is eligible for $2.9 billion in tariff refunds, with just under $100 million still to arrive, and that the money is going into lower prices — with the impact landing in the third quarter. Compare that with Target, which let $994 million of refunds fall to the bottom line and doubled quarterly profit, or Lowe’s, which booked $0.11 of EPS from the same IEEPA mechanism. Three retailers, one windfall, three uses. Walmart is spending it on price. That is what a company does when it thinks the fight ahead is for traffic, not margin.
The raise that read as a downgrade
Full-year net sales growth went to 4–5% from 3.5–4.5%. Adjusted EPS went to $2.80–$2.87 from $2.75–$2.85. Both moved up. Neither moved much.
The third quarter is the problem. Walmart guided net sales up 3–3.75% and adjusted EPS of 62 to 64 cents — against the 81 cents it had just delivered. Some of that is ordinary seasonality. Some of it is the price investment being funded out of the refunds. And some of it is fuel: the company flagged just over $2 billion of incremental cost headwinds from higher fuel prices this year.
A beat-and-raise that guides the next quarter down sequentially, into price cuts and a $2 billion cost line, is not the print a stock priced on defensive-consumer certainty wants to hand over.
What to watch
- Whether the price cuts buy traffic. The refunds get spent in Q3. If comps do not accelerate off that spend, Walmart has converted a one-off windfall into permanently lower prices and got nothing durable for it.
- The pharmacy drag lapping. The maximum-fair-price rules took effect 1 January. The headwind eases mechanically once the comparison laps — unless the covered price schedule widens first.
- Mix versus margin. E-commerce, advertising and membership are carrying the growth. The more of the raise that comes from those lines rather than merchandise, the more Walmart is a logistics and media business wearing a retailer’s clothes.
- The read-across. Walmart is the cleanest read on the US low-to-middle-income consumer there is. A 2.6% comp with an 80bp regulatory dent is not weakness — but it is not the acceleration the retail tape has been pricing, and it lands in the same week Klarna cut guidance on the consumer.
Walmart beat, raised, and grew e-commerce 23%. It also told the market that the next quarter costs money and the store aisle is growing at 2.6%. On a stock priced for inevitability, the second half of that sentence is the part that trades.