Walmart lifted its full-year sales and profit targets after a fiscal second quarter that beat revenue estimates, but the market focused on a $2.9 billion tariff refund the company plans to plow into price cuts rather than the bottom line. Shares fell about 5% in premarket trading Thursday.
The refund changes the math
The retailer said it is eligible for roughly $2.9 billion in tariff refunds and has received all but less than $100 million of that sum. Chief Financial Officer John David Rainey told CNBC the funds will be used to lower prices for consumers, with the impact visible in the third quarter. The refund boosted the gross profit rate to 25.4% in the quarter ended July 31. At the same time, Walmart expects just over $2 billion of incremental cost headwinds from higher fuel prices this year.
Sales and profit guidance moves up
Walmart now expects full-year net sales growth of 4% to 5%, up from a prior range of 3.5% to 4.5%. Adjusted earnings per share are seen at $2.80 to $2.87, compared with the previous $2.75 to $2.85. For the third quarter, the company forecasts net sales growth of 3% to 3.75% and adjusted earnings of 62 cents to 64 cents per share. Revenue in the second quarter rose 5.9% to $187.94 billion, above the $186.77 billion consensus. Adjusted earnings per share came in at 81 cents versus an expected 74 cents, though the comparison was not immediately confirmed.
E-commerce and memberships keep growing
Global e-commerce sales jumped 23%. U.S. comparable sales grew 2.6%, missing the 3.5% estimate, partly because a 0.8% headwind from drug price caps hit the health and wellness segment. Walmart+ membership fee revenue rose 17%, with net additions hitting a second-quarter high. Sam's Club U.S. net sales reached $25.7 billion, up 8.8% year over year, while global advertising revenue climbed 38%. U.S. net sales were $125.2 billion, up from $120.9 billion a year earlier.
Consumers stretched but spending
Rainey said consumers remain stretched, especially by gasoline prices, and Walmart is cutting prices across categories including beef. Real wage growth is keeping pace, he added, and shoppers have been resilient. The company's value positioning and scale have historically helped it gain share during pullbacks. Net income fell to $6.37 billion, or 80 cents per share, from $7.03 billion, or 88 cents, in the year-ago period, reflecting a loss on investments offset by a tax benefit.