Retail giant Walmart raised its full-year profit and sales expectations on Thursday due to its online business achieving double-digit growth once again. However, the company’s profit for the second quarter fell below expectations in a rare occurrence that overshadowed its sales growth, marking the first time in three years.
In the second quarter of this year, Walmart’s same-store sales, which measure the performance of stores open for at least a year, exceeded Wall Street’s expectations. However, the profit did not meet expectations, marking the first time since May 2022 that the company failed to meet quarterly profit expectations. The retail titan stated that profit for the quarter faced pressure due to various one-time expenses, such as restructuring costs, higher insurance claims (including general liability and workers’ compensation), and legal settlement fees, all of which weighed down profit growth.
Despite the rare miss on profit expectations, Walmart still raised its full-year sales forecast, now expecting a net sales growth of 3.75% to 4.75% for the year, higher than the previous forecast of 3% to 4%. The company slightly adjusted its earnings per share forecast to $2.52 to $2.62, up from the previous range of $2.50 to $2.60.
With high interest rates and years of price increases, many consumers have cut back on large purchases. Walmart observed that consumers have reduced spending on clothing, home goods, and other non-essential items, especially lower to middle-income families, opting for discounted items instead.
Doug McMillon, Walmart’s CEO, noted during the company’s earnings call that lower to middle-income families are more sensitive to price increases, particularly in non-essential product categories.
As a leading company in the U.S. retail industry, Walmart’s large scale and widespread stores across America make it a key indicator of the country’s consumer health. The company’s second-quarter sales performance reflects recent U.S. economic data, showing stable retail sales this summer, partly driven by promotions like Walmart’s week-long special event in July boosting consumer demand. A relatively stable job market also supported consumer spending.
However, Walmart’s second-quarter profit miss had repercussions in the stock market. As of 9:31 a.m. Eastern Time on Thursday, Walmart’s stock price dropped by 4.4% during New York trading, marking the largest decline since May 15. By the end of Wednesday’s trading, the stock had risen by nearly 14% this year, outperforming the 8.7% gain of the S&P 500 index.