Walmart posts worst comparable sales performance in six years

Walmart posts worst comparable sales performance in six years. Add Axios as your preferred source to.

Key points

• It additionally climbed its adjusted earnings-per-share outlook from a range of $2.75 to $2.85 to a range of $2.80 to $2.87.
• By the numbers: The chain recorded a 5.9% growth in revenue in the quarter, to $187.9 billion, compared with a year earlier, edging S&P Capital IQ expectations of $186.8 billion.
• Comparable sales expansion of 2.6% in the second quarter when excluding fuel, trailing Wall Street's expectation of concerning 3.5%, according to TD Cowen analysts.
• Reality check: Walmart raised its fiscal year net sales outlook from a range of 3.5% to 4.5% to a range of 4% to 5%.
• Yes, but: Investors were expecting a bigger boost to the outlook, according to Goldman Sachs analyst Kate McShane.

Driving the news: The chain recorded U.S. Comparable sales expansion of 2.6% in the second quarter when excluding fuel, trailing Wall Street's expectation of concerning 3.5%, according to TD Cowen analysts.

"Given the significant role Walmart plays in the lives of many Americans, the deterioration will set some alarm bells ringing over whether the consumer is running out of steam, " according to GlobalData retail analyst Neil Saunders.

"It also raises the question as to whether the helpful gains from more higher-income shoppers migrating to Walmart are starting to fade." The impact: Walmart shares plunged 8.9% in midday trading.

"While we acknowledge the US comp number may hold shares back today, we remain encouraged by WMT's ability to gain share and grow profits faster than sales, " TD Cowen analyst Oliver Chen wrote in a research note.

Walmart CFO John David Rainey remarked on an earnings call that the business felt "it's prudent to remain cautious by only raising the guide modestly" in part since it's facing "arguably a softer consumer environment than in February when we introduced our initial outlook."

That included a 24% rise in U.S. E-commerce sales. It drew strength from store-fulfilled delivery, advertising and online marketplace sales.

Notably, the firm cited merchandising strength in grocery sales, personal care items, beauty, pet supplies, toys and fashion.

Threat level: Drug cost declines – caused in part by the federal government's Medicare prescription drug regulation – undermined the retailer's U.S. Sales.

For context, the firm cited GLP-1 drug costs as a particular factor, "as script growth was more than offset by price-mix headwinds."

America is experiencing its biggest prescription drug cost deflation in generations, Axios' Courtenay Brown noted Monday.

What to watch: Walmart remarked it is reinvesting tariff refunds in costs. It might've irked investors who were hoping they would bolster margins.

"You'll see a combination of rollbacks across food, general merchandise, consumables, fashion, " Furner remarked on the call. "You'll see it throughout the store."

As well as the latest share-price reaction, editor's note: This story was updated with extra information from Walmart's earnings call and analyst coverage.

Taken together, the developments around walmart posts worst comparable sales performance in six years point to a situation that is still moving, and the coming days should bring more clarity.