Walmart Q2 FY27: Comp Sales Miss Sinks Stock 8% Despite Beat

Walmart beat Wall Street's revenue and profit targets for its fiscal second quarter on Thursday, raised its full-year guidance, and watched its stock drop roughly 8% in premarket trading anyway. The reaction says more about what investors are pricing into the country's largest retailer than anything in the headline numbers.

For more on retail earnings, see our coverage of Walmart's earlier earnings preview, Lowe's Q2 earnings beat and Target's comp sales beat.

The print itself was strong by almost every conventional measure. Revenue came in at $187.9 billion, up 5.9% from a year ago and ahead of the $186.77 billion analysts surveyed by LSEG expected. Adjusted earnings per share landed at 81 cents, above the 74 cents consensus.

Operating income jumped 28.8%, or 17.4% on an adjusted, constant-currency basis. Global eCommerce sales grew 23%, and the advertising business, still small next to the core retail operation but growing fast, climbed 38% worldwide.

The number that moved the stock was buried a few lines down: Walmart U.S. comparable sales grew 2.6%, well short of the 3.5% Wall Street had modeled, according to FactSet. CFO John David Rainey attributed part of the shortfall to an 80 basis point headwind in health and wellness, where new price caps on certain drugs took effect this year. Management framed the miss as regulatory noise rather than a demand problem.

There is a real tension in this report between the top-line growth story and the comp-sales number that traders use as the quarter's scorecard. A 2.6% comp at the scale Walmart operates is not weak in absolute terms. It missed a bar that had been set higher after a string of beats, and in a market already nervous about consumer spending, a miss against expectations reads worse than the same number would have a year ago.

The tariff refund story is the other half of this print. Rainey told CNBC that Walmart is eligible for roughly $2.9 billion in IEEPA tariff refunds, with just under $100 million still outstanding, and that the company plans to funnel those funds into price cuts rather than the bottom line.

Management said the 28.8% operating income growth included a 750 basis point net benefit from the refunds already received, partially offset by the price investments made during the quarter. Strip out that benefit, and the company said underlying operating income growth still came in at the top end of its own guidance range, the more durable number for anyone modeling the business past this quarter.

Segment detail supports the read that Walmart's growth engine, not its core low-price grocery business, is doing the heavy lifting. Walmart U.S. eCommerce sales rose 24%, with store-fulfilled delivery up 40% and marketplace net sales up more than 50%. Sam's Club U.S. net sales rose 8.8% to $25.7 billion, with membership fee revenue up 6% and eCommerce growth of 26%.

Walmart International posted net sales of $35.2 billion, up 12.8% (7.9% in constant currency), with Sam's Club China hitting a record member count. Global membership fee revenue, the recurring-revenue line investors watch most closely for the Walmart+ versus Amazon Prime comparison, grew 17%.

Guidance moved in the right direction, which makes the stock reaction more about positioning than fundamentals. For the third quarter, Walmart guided net sales growth of 3.0% to 3.75% and adjusted operating income growth of 2.0% to 4.0%, with adjusted EPS of 62 to 64 cents.

For the full fiscal year, the company raised its net sales growth outlook to 4.0% to 5.0% from a prior 3.5% to 4.5%, and lifted its adjusted EPS range to $2.80 to $2.87 from $2.75 to $2.85. Raising full-year guidance the same day the stock drops 8% is the clearest signal that this move is about the comp-sales miss and the market's read on the lower and middle-income consumer, not about Walmart's own view of its business.

Rainey's comments to CNBC leaned into that consumer picture directly. He said Walmart continues to see shoppers who are stretched thin, particularly by higher gas prices, even as real wage growth has kept pace and kept spending resilient. Grocery sales grew at a mid-single-digit rate for the quarter, while health and wellness saw a low single-digit decline.

General merchandise ticked up on strength in toys, fashion, furniture, and private label. Management also flagged more than $2 billion of incremental cost headwinds tied to higher fuel prices expected for the year.

Peer earnings this week give the print useful context. Home Depot and Lowe's both traded higher after their own Q2 reports, and Target jumped after its print, all released within the same 48-hour window. Walmart's stock move stands out against that backdrop, and points to a market that treats comp-sales momentum, not absolute revenue growth, as the deciding metric for retail earnings this quarter.

Discretionary retail, tracked by the XRT ETF, traded higher on the morning even as Walmart fell, suggesting the sector reaction was Walmart-specific rather than a read-through on the consumer broadly.

What to watch next: whether the stock's premarket move holds through the regular session, and whether Walmart's price-investment strategy, funded by the tariff refunds, shows up in comp sales next quarter. Management explicitly said it is prioritizing price cuts over margin in Q3, which sets up a test of whether Walmart can reaccelerate the comp number that just disappointed the market, or whether the health and wellness headwind and broader consumer strain persist into the holiday quarter.

This content is for informational purposes only and does not constitute financial advice. Past performance is not indicative of future results. Consult a qualified financial advisor before making investment decisions.

Related Research