Walmart sees sales drop as US consumer spending retreats

By Al Jazeera Staff and Reuters.

Key points

• The average cost 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.
• This as overall retail sales dipped in July, dropping 0.6 percent, marking the biggest decline since May 2025, according to the US Commerce Department data issued last week.
• "The bread and butter of the company is still in-store and in-person shopping, " Melius Research analyst Jacob Aiken-Phillips informed the Reuters News Agency.
• Consequently, Walmart upgraded its forecast for net sales expansion, from 3.5-4.5 percent to 4-5 percent.
• US same-store sales rose 2.6 percent in the second quarter, according to the company's earnings published on Thursday, falling short of the 3.8 percent forecast by analysts at LSEG.

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 demonstrates.

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

Notably, the Bentonville, Arkansas-based retailer remarked heightened petrol costs 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 remarked on a call with analysts on Thursday.

Rates are continuing to jump. The average cost 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. It tracks daily petrol costs. By comparison, the average cost was $2.98 when the US and Israel first struck Iran.

In practice, the big-box retailer additionally stated it projected $2bn in incremental fuel-related costs above its original guidance.

Sales dropped in Walmart's US pharmacy business and additionally 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).

In practice, the cost 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.

Walmart additionally unveiled cost 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 additionally being deployed by rivals including Target.

Walmart remarked, even so, that cost 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 remarked.

Nevertheless, 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. Nevertheless, Walmart's e-commerce sales are on the upswing, with sales jumping 24 percent in the US.

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

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

"Our fear is that it relates to lower ticket given wider signs of consumer weakness and price increases over the last year-and-a-half, " William Blair analyst Dylan Carden informed Reuters.

That comes alongside earnings from Target, one of Walmart's closest competitors. On Wednesday, the Minneapolis, Minnesota-based big-box retailer documented 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 firm has additionally cut rates 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 almost as stark a drop. TJX stock was down 1.7 percent, and Target was down by 0.1 percent.

In short, walmart sees sales drop as US consumer spending retreats is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.