Walmart shares were trading roughly flat in pre-market just before the earnings call but are now down by roughly 5.7% after.
The US retailer reported a beat on earnings per share of $0.81 versus expectations of $0.75 and also raised its annual targets slightly for the first time this year. That being said, the devil is in the details with comparable sales i.e. same-store sales heavily missing on estimates and only seeing a rise of 2.6% in Q2. Market expectations were for that to hit around 3.7% to 3.8%.
In essence, that’s a key metric in signaling that consumers are pulling back on spending in the wake of rising gas prices among other things.
Walmart’s earnings call is often times looked as a bellwether for the US consumer, as it helps to track the behaviour of price-sensitive shoppers and where households are prioritising their spending/finances.
So, that is definitely a bit of a blow.
Looking at the other aspects of the earnings release, Walmart now sees net sales to grow between 4% and 5% in the fiscal year 2027 as compared with its earlier target growth of between 3.5% and 4.5%. And the retailer also now expects annual adjusted EPS to come in between $2.80 and $2.87, compared to the earlier target of $2.75 to $2.85.
Drilling down to the drag on comparable sales, that mostly stems from its health and wellness category – which now falls to the low single-digits as a result of a 900 bps impact from the maximum fair price implementation under the Inflation Reduction Act. If you take that out of the equation, Walmart is saying that their comparable sales actually grew by 3.4% – still a miss.
This article was written by Justin Low at investinglive.com.