Walmart US Sales Growth Weakest Since 2020, Pharmacy Business Drags

Walmart Inc. shares fell in premarket trading Thursday after the retail giant reported second-quarter results and issued weaker-than-expected Q3 guidance.

Walmart Results Snapshot

Walmart reported adjusted earnings per share of 81 cents, beating the consensus estimate of 74 cents. Sales reached $187.9 billion, surpassing the $186.8 billion expectation.

Global advertising revenue rose 38%, with strong performance across all business segments. Global membership fee revenue grew 17% in the quarter.

Gross margin expanded 96 basis points year-over-year to 25.4%, driven by Walmart U.S. operations and tariff refund benefits.

Adjusted operating income grew 17.4% on a constant-currency basis. Strong sales, higher gross margins, tariff refund benefits, and global membership growth supported the increase.

Walmart ended the quarter with $11.5 billion in cash and cash equivalents, with total debt of $57.2 billion.

Operating cash flow increased $1.4 billion to $19.7 billion. However, free cash flow declined $1.4 billion to $5.5 billion.

The company has repurchased 42.3 million shares to date, spending $5.1 billion.

Business Performance

Global e-commerce sales grew 23%, driven by store pickup and delivery, as well as marketplace growth.

Walmart U.S. comparable sales grew 2.6%, driven by higher transaction volumes. According to the Wall Street Journal, this marks the retailer's smallest quarterly increase since 2020. Pharmacy inflation declines related to new maximum fair price regulations effective January 1 created a 125-basis-point headwind to comparable sales.

The report added that CFO John David Rainey downplayed the importance of comparable store sales, noting that stores increasingly serve as digital fulfillment centers for online orders and deliveries.

Walmart International sales grew 7.9% on a constant-currency basis, supported by e-commerce and store growth.

Sam's Club U.S. sales grew 8.8%, helped by higher transaction volumes and unit sales. Grocery and general merchandise performed strongly.

Inventory increased $3.9 billion, up 6.7% year-over-year, to $61.6 billion. On a constant-currency basis, inventory grew 6%.

Walmart Outlook

During the call, Walmart executives said the company lowered prices on 11,000 items in the U.S. during Q2. The retailer continues to see growth from higher-income households.

Executives said the annual forecast assumes slightly stronger sales in the second half of the year than previously expected, driven by price investments.

The forecast also assumes fuel prices and tariffs remain at current levels. Walmart began increasing the number of markdowns in late July, expressing satisfaction with the start of the back-to-school season.

Walmart raised its fiscal 2027 adjusted EPS outlook from $2.75-$2.85 to $2.80-$2.87. The consensus estimate is $2.90.

The company raised its fiscal 2027 sales outlook from $731.124 billion-$738.188 billion to $734.656 billion-$741.720 billion. The consensus estimate is $752.250 billion.

For Q3, Walmart expects adjusted EPS of 62 cents-64 cents, below the 68-cent estimate. Sales are expected at $183.134 billion-$184.468 billion, compared to the $188.339 billion estimate.

WMT stock performance: Walmart shares fell 7.71% in premarket trading Thursday to $105.49.