Walmart's shares experienced their largest intraday decline since 2022, falling as much as 10% on Thursday, erasing a modest year-to-date gain. This significant drop was triggered by the retailer reporting a slower-than-expected growth in U.S. comparable sales for the second quarter. Sales at U.S. stores open at least a year, excluding fuel, rose by 2.6%, which was shy of the lowest analyst estimate compiled by Bloomberg and represented the slowest growth in over six years.
The sales miss was attributed primarily to pricing pressure in its pharmacy business, due to federal negotiations leading to lower drug prices. Although the number of transactions remained similar, shoppers spent less per trip compared to a year ago. Excluding health and wellness, U.S. comparable sales grew by 3.4%. Despite these challenges, Walmart gained market share, particularly in groceries, by strategically lowering prices on over 11,000 items, double the typical amount, to attract price-sensitive consumers.
Analysts like Michael Lasser of UBS Securities noted that while the quarterly results present near-term challenges and are likely to cause a stock decline, the long-term thesis for Walmart remains intact. The company is considered well-positioned to gain market share, deepen customer engagement, and expand revenue streams. However, the company now expects more than $2 billion in fuel-related costs for the year, an increase from its previous outlook, further impacting its financial performance.
