Walmart's stock experienced a substantial decline, falling as much as 10% intraday, the largest drop since 2022. This followed a rare miss on quarterly comparable sales, with U.S. sales at stores open at least a year, excluding fuel, increasing by only 2.6% in the second quarter. This figure was shy of even the lowest analyst estimates and represents the slowest growth rate in more than six years. The disappointing performance has fueled concerns among investors about a decelerating U.S. economy and softening consumer sentiment, especially given Walmart's role as a bellwether for consumer health.
The primary factor contributing to the slower sales growth was pricing pressure within its pharmacy business, attributed to new federal drug pricing rules for Medicare enrollees. While the company's core U.S. comparable sales (excluding health and wellness) rose 3.4%, the overall average ticket, or spending per transaction, only grew 1.1%, significantly less than the 3.1% rise a year ago. Walmart's CFO, John David Rainey, indicated that the impact from the federal drug price negotiations was greater than anticipated and is expected to continue into the next year.
Despite these challenges, Walmart did raise its full-year guidance for sales and adjusted operating income. The company attributed this positive adjustment partly to receiving tariff refunds, which it plans to continue investing in price reductions, or "rollbacks," to attract and retain customers. Walmart lowered prices on over 11,000 items in the quarter and gained market share, particularly in groceries. However, the retailer is also facing increased costs from elevated fuel prices, now anticipating more than $2 billion in fuel-related expenses this year, prompting consumers to make trade-offs in their spending.
