Walmart

Aug. 20 (UPI) — Walmart on Thursday reported sales grew at their slowest pace in the retailer’s latest fiscal quarter in six years, sending its shares down more than 9%.

In the second quarter ended July 31, comparable sales in the US, including stores and digital channels open for at least a year, were 2.6%, the smallest advance since 2020, Walmart said.

“Customers tell us they’re still feeling some pressure,” Walmart CEO John Furner said on an earnings call with analysts.

Walmart blamed the disappointing sales growth partly on new federal rules on drug pricing that cut the prices of several costly medications for those enrolled in Medicare.

The company is also anticipating at least $2 billion in extra costs this year from higher gasoline prices due to rising oil prices due to the U.S.-Israeli war with Iran.

As the national average for a gallon of regular gasoline has risen to $4.10 from $2.98 and inflation spiked to 3.4% from 2.4% before the conflict, Walmart said consumers are making adjustments.

“As you go through month by month in the last quarter, you can tell when fuel prices increased and got above $4, and perhaps there’s a psychological impact to that, that there are choices that consumers are making,” Walmart finance chief John David Rainey told analysts. “It’s why we have leaned so heavily into lower prices.”

Meanwhile, Walmart said it has seen gains as more affluent customers trade down as their budgets tighten.

For the full year, Walmart expects net sales to rise 4% to 5%, up from 3.5$ to 4.5% previously. Operating income is expected to rise 7.5% to 8.5%, up from an earlier view for 6% to 8%.

Rainey told CNBC that Walmart is eligible for tariff refunds of around $2.9 billion, and it has yet to receive nearly $100 million of that. He said the funds would be used to lower prices.

Walmart sales are slumping as US consumer spending pulls back, with the economic impact of tariffs and the United States’ tensions with Iran weighing on consumers, the big-box retailer’s most recent earnings report shows.

US same-store sales rose 2.6 percent in the second quarter, according to the company’s earnings released on Thursday, falling short of the 3.8 percent forecast by analysts at LSEG. That marked the slowest quarterly increase in six years.

The Bentonville, Arkansas-based retailer said heightened petrol prices are to blame for the slowdown in spending.

“When fuel prices increase and get above $4, perhaps there’s a psychological impact to that … consumers are making trade-offs,” CFO John David Rainey said on a call with analysts on Thursday.

Prices are continuing to jump. The average price for a gallon (3.78 litres) of petrol rose to $4.10 on Thursday, up from $4.07 a week ago, according to the American Automobile Association, which tracks daily petrol prices. By comparison, the average price was $2.98 when the US and Israel first struck Iran.

The big-box retailer also said it expected $2bn in incremental fuel-related costs above its original guidance.

Sales dropped in Walmart’s US pharmacy business and also dipped elsewhere. Overall, quarterly revenue rose 3.4 percent, the slowest pace since the first quarter of fiscal 2023.

Consumers are spending more in the checkout line — 1.1 percent higher than the previous quarter — but it is still well below the 3.1 percent jump this time last year.

That comes as consumer inflation ticked up last month by 0.1 percent from the month prior and 3.4 percent from this time last year, according to the US Labor Department’s Bureau of Labor Statistics (BLS).

The price of fresh fruit jumped 2.2 percent from a month ago, butter by 0.8 percent, and fresh fish by 1 percent, according to the BLS report.

This as overall retail sales dipped in July, dropping 0.6 percent, marking the biggest decrease since May 2025, according to the US Commerce Department data released last week.

Walmart also announced price cuts on Wednesday on 11,000 items, to be fuelled in part by the $2.9bn in tariff refunds it has received – a one-time boon – and a strategy also being deployed by rivals including Target.

Walmart said, however, that price changes took effect in July, so the effects might be more apparent in the company’s next earnings report.

“You don’t necessarily expect to have that offsetting benefit to the lower prices in the immediate period,” Rainey said.

However, fewer consumers are venturing into brick-and-mortar stores, with foot traffic increasing by 1.5 percent for the quarter, a drop from 3 percent in the previous quarter. However, Walmart’s e-commerce sales are on the upswing, with sales jumping 24 percent in the US.

As a result, Walmart upgraded its forecast for net sales growth, from 3.5–4.5 percent to 4–5 percent.

But that is limited because in-store sales are still the company’s premier offering.

“The bread and butter of the company is still in-store and in-person shopping,” Melius Research analyst Jacob Aiken-Phillips told the Reuters News Agency.

Mixed big-box earnings

Other big-box retailers also reported earnings in the last couple of days, with a pullback in consumer spending being an undertone. TJX, the parent company of TJ Maxx and Marshalls, reported sales growth of 1 percent for the quarter, a slowdown from 6 percent the quarter before.

“Our fear is that it relates to lower ticket [less purchases per shopping trip] given wider signs of consumer weakness and price increases over the last year-and-a-half,” William Blair analyst Dylan Carden told Reuters.

That comes alongside earnings from Target, one of Walmart’s closest competitors. On Wednesday, the Minneapolis, Minnesota-based big-box retailer reported net sales jumping 5.3 percent for the quarter compared to this time last year, at $26.5bn.

That was driven by a 3.6 percent rise in in-store traffic. The company has also cut prices over the last year on more than 10,000 items and received a $1bn tariff refund.

On Wall Street, Walmart is taking a hit on the heels of its earnings report, with shares down by 9.6 percent since the market opened. Other big-box retailers are lower, but not showing nearly as stark a drop. TJX stock was down 1.7 percent, and Target was down by 0.1 percent.