Walmart on Thursday raised its full-year earnings and sales outlook as its online business posted another quarter of double-digit gains, even as the company said costs are rising from higher tariffs.
The big-box retailer topped Wall Street’s quarterly sales estimates but fell short of earnings expectations, the first time it missed on quarterly earnings since May 2022. The company said it felt pressure on profits for the period, including from some one-time expenses, such as restructuring costs, pricier insurance claims and litigation settlements.
Walmart said it now expects net sales to grow 3.75% to 4.75% for the fiscal year, up from its previous expectations of 3% to 4%. It raised its adjusted earnings per share outlook slightly to $2.52 to $2.62, up from a prior range of $2.50 to $2.60 per share.
In an interview with CNBC, Chief Financial Officer John David Rainey said the company is working hard to keep prices low — including speeding up imports from overseas and stepping up the number of Rollbacks, or limited-time discounts, in its stores.
“This is managed on an item-by-item and category-by-category basis,” he said. “There are certainly areas where we have fully absorbed the impact of higher tariff costs. There are other areas where we’ve had to pass some of those costs along.”
But he added “tariff-impacted costs are continuing to drift upwards.”
Even so, Rainey said Walmart hasn’t seen a change in customer spending. For example, sales of private label items, which typically cost less than national brands, were roughly flat year over year, he said.
“Everyone is looking to see if there are any creaks in the armor or anything that’s happening with the consumer, but it’s been very consistent,” he said. “They continue to be very resilient.”
Yet on the company’s earnings call, CEO Doug McMillon said middle- and lower-income households have been more sensitive to tariff-related price increases, particularly in discretionary categories.
“We see a corresponding moderation in units at the item level as customers switch to other items, or in some cases, categories,” he said.
Here’s what the big-box reported for the fiscal second quarter compared with what Wall Street expected, according to a survey of analysts by LSEG:
Walmart shares fell about 2% in premarket trading Thursday.
Walmart’s net income jumped to $7.03 billion, or 88 cents per share, in the three-month period that ended July 31, compared with $4.50 billion, or 56 cents per share, in the year-ago quarter.
Revenue rose from $169.34 billion in the year-ago quarter.
Comparable sales for Walmart U.S. climbed 4.6% in the second quarter, excluding fuel, compared with the year-ago period, as both the grocery and health and wellness category saw strong growth. That was higher than the 4% increase that analysts expected. The industry metric, also called same-store sales, includes sales from stores and clubs open for at least a year.
At Sam’s Club, comparable sales jumped 5.9% excluding fuel, higher than the 5.2% that analysts anticipated.
E-commerce sales jumped 25% globally and 26% in the U.S., as both online purchases and advertising grew. In the U.S., Walmart said sales through store-fulfilled delivery of groceries and other items grew nearly 50% year over year, with one-third of those orders expedited. The company charges a fee for some of those faster deliveries, and others are included as a benefit of its subscription-based membership program, Walmart+.
Its global advertising business grew 46% year over year, including Vizio, the smart TV maker it acquired for $2.3 billion last year. Its U.S. advertising business, Walmart Connect, grew by 31%.
As Walmart’s online business drums up more revenue from home deliveries, advertising and commissions from sellers on its third-party marketplace, e-commerce has become a profitable business. The company marked a milestone in May — posting its first profitable quarter for its e-commerce business in the U.S. and globally.
Rainey said on Thursday that Walmart doubled its e-commerce profitability in the fiscal second quarter from the prior quarter.
In the U.S., shoppers both visited Walmart more and spent more on those trips during the quarter. Customer transactions rose 1.5% year over year and average ticket increased 3.1% for Walmart’s U.S. business.
As the largest U.S. retailer, Walmart offers a unique window into the financial health of American households. As higher duties have come in fits and starts — with some getting delayed and others going into effect earlier this month — Wall Street has tried to understand how those costs will ripple through the U.S. economy.
Walmart warned in May that it would have to raise some prices due to higher levies on imports, even with its size and scale. The company’s comments drew the ire of President Donald Trump, who said in a social media post that Walmart should “EAT THE TARIFFS.”
About a third of what Walmart sells in the U.S. comes from other parts of the world, with China, Mexico, Canada, Vietnam and India representing its largest markets for imports, Rainey said in May.
According to an analysis by CNBC of about 50 items sold by the retailer, some of those price changes have already hit shelves. Items that rose in price at Walmart over the summer included a frying pan, a pair of jeans and a car seat.
Rainey on Thursday declined to specify items or categories where Walmart had increased prices, saying the company is “trying to keep prices as low as we can.”
He said one of the company’s strategies has been bringing in inventory early, particularly for Sam’s Club as it gets ready for the second half of the fiscal year and its crucial holiday season. At the end of the quarter, inventory was up about 3.5% at Sam’s Club, Rainey said. It was up 2.2% for Walmart U.S.
On the company’s earnings call, McMillon said the impact of tariffs has been “gradual enough that any behavioral adjustments by the customer have been somewhat muted.”
“But as we replenish inventory at post-tariff price levels, we’ve continued to see our costs increase each week, which we expect will continue into the third and fourth quarters,” he said.
Yet even with higher costs from tariffs, Walmart has fared better than its retail competitors as it has leaned into its reputation for value, competed on faster deliveries to customers’ homes and attracted more business from higher-income households.
The Arkansas-based retailer’s performance has diverged sharply from rival Target, which posted another quarter of sales declines on Wednesday and named the new CEO who will be tasked with trying to turn around the company.
Walmart has gained from Target’s struggles. It has followed the Target playbook by launching more exclusive and trend-driven brands, including grocery brand BetterGoods and activewear brand Love & Sports. It has also expanded its third-party marketplace to include prestige beauty brands and more.
Sales of general merchandise, items outside of the grocery department, were a bright spot for Walmart in the fiscal second quarter, Rainey said. That category struggled during peak inflation in recent years, as consumers spent less on discretionary items because of rising grocery bills.
Comparable sales for general merchandise rose by a low-single-digit percentage and accelerated throughout the quarter, Rainey told CNBC. He added clothing and fashion sales “really shined for us.”