Walmart Beat the Quarter and Lost 9% of Its Market Value
Revenue rose 5.9% to $187.9 billion with e-commerce up 23%, but the slowest U.S. comparable sales growth in six years and a cautious third-quarter outlook sent the shares tumbling.
Walmart reported second-quarter revenue of $187.94 billion on Thursday, up 5.9% from a year earlier and ahead of the roughly $186.8 billion analysts expected, with adjusted earnings of 81 cents a share that also beat.
The stock fell more than 9%.
What the market objected to
Two things. The outlook for the current quarter was more cautious than investors had priced, and U.S. comparable sales grew 2.6% — the slowest pace in six years.
For a company valued as the most reliable operator in American retail, deceleration in the core domestic business is the number that matters. Walmart's premium rests on taking share in every environment, and 2.6% is share-taking at a considerably slower rate than the market had assumed.
What is still working
The parts of the business that have re-rated the stock over the past three years all accelerated. Global e-commerce sales rose 23%. Membership fee revenue climbed 17%, with second-quarter net additions to its paid program at a high. Global advertising revenue grew 38%.
Those are high-margin income streams attached to a retail operation that runs on very thin ones, and they are why the company has traded at a multiple more familiar to technology firms than to grocers.
Management maintained full-year guidance for net sales growth of 4% to 5% and adjusted operating income growth of 7% to 8.5% in constant currency.
The consumer read
Walmart's results are the most closely watched read on the American household, and this quarter's message is consistent with the government data. Retail sales across the economy fell 0.6% in July. Consumer sentiment slid to about 51 in early August. Shoppers are trading down, which helps this company, but they are also buying less overall, which eventually does not.
The company has been absorbing tariff costs rather than passing them through, on the reasoning that price leadership is the franchise. That decision protects traffic and compresses margin — a trade that looks wise while competitors raise prices and expensive if the cost pressure lasts another year.
