Walmart's stock dropped 9% on Thursday, reaching session lows, following a slowdown in sales growth. This performance, marked by the slowest US comparable sales growth in over six years, raised concerns about consumer spending habits and the broader economic outlook. The company's US comparable sales, excluding fuel, increased by 2.6% in the second quarter, falling below analyst expectations and the 4.1% growth seen in the first quarter.
The decline in sales was partly attributed to pricing pressures in Walmart's pharmacy business due to new federal legislation requiring the sale of some high-cost Medicare drugs at capped prices. Excluding the wellness category, comparable sales still only rose 3.4%, which was below the 3.8% Wall Street projection. Additionally, Walmart anticipates over $2 billion in increased costs due to higher fuel prices, with CFO John David Rainey noting that gasoline prices above $4 per gallon are influencing consumer choices.
The broader stock market also reacted negatively to Walmart's results. The Dow Jones Industrial Average lost 686 points (1.3%), the S&P 500 was down 66 points (0.9%), and the Nasdaq composite fell 1%. Energy was the only sector in the S&P 500 to see gains, while consumer staples, financial, and information technology sectors were down.
In contrast to Walmart, Ross Stores reported strong second-quarter earnings, with EPS coming in at $2.60 per share, significantly above the previous year's $1.56. Net sales for Ross Stores were $6.26 billion, slightly exceeding estimates of $6.16 billion, representing 13% growth. The company also raised its outlook for the third and fourth quarters, with shares up 27% year-to-date, benefiting from increased engagement from existing customers and an influx of new, younger shoppers.
