Walmart reported its slowest growth in U.S. comparable sales in six years during the recent quarter, prompting a cautious outlook for the year. This announcement led to a 6% drop in company shares before the market opened on Thursday.
In the second quarter, U.S. comparable sales, which include sales from stores open for at least one year and related online sales, rose by 2.6%. This is a decline from the 4.1% growth in the previous quarter. When excluding the wellness category, which encompasses Walmart’s pharmacies, sales increased by 3.4%. The wellness category was affected by federal legislation that requires pharmacies to dispense costly Medicare drugs at capped prices. Analysts had projected a 3.8% increase, according to FactSet.
Walmart’s U.S. e-commerce business, a significant growth driver, grew by 24%, although this was slower than the 26% growth in the first quarter. With Walmart being an early reporter of second-quarter results among major retailers, its performance can offer insights into consumer behavior amidst ongoing price pressures, such as those from the conflict in Iran.
With over 150 million customers visiting its website or stores weekly, Walmart is a key indicator of consumer spending habits. Recent U.S. data showed weak retail sales in July, with rising economic pessimism and increased living costs, affecting consumers.
The recent figures revealed Walmart’s smallest gain in comparable store sales since a 1.9% increase for the quarter ending January 31, 2020. Despite this, the retailer is seeing its customer base expand, particularly gaining market share among households earning over $100,000 annually.
Walmart reported a quarterly net income of $6.37 billion, or 80 cents per share, exceeding Wall Street expectations of 74 cents per share. Sales rose by 5.9% to $187.94 billion, surpassing analysts’ predictions of $186.62 billion, as per FactSet.
For the third quarter, Walmart forecasts earnings per share between 62 and 64 cents, with anticipated sales growth of 3% to 3.5%, translating to sales of $184.88 billion to $186.23 billion. These predictions fall below analysts’ expectations of 68 cents per share and $188.19 billion in sales.
Annually, Walmart projects earnings per share to range from $2.80 to $2.87, with an overall sales increase of 4% to 5%. This suggests sales will be between $741.7 billion to $748.8 billion. Analysts had anticipated $2.90 per share and $752.06 billion in sales for the year.