Walmart warned Thursday that rising fuel costs and persistent inflation are beginning to weigh more heavily on American consumers, as the retail giant issued weaker-than-expected earnings guidance despite posting strong quarterly sales growth and continued momentum in e-commerce.
The cautious outlook from the nation's largest retailer added to growing concerns about the resilience of U.S. consumer spending amid elevated gas prices, geopolitical instability linked to the Iran conflict, and broader anxiety over household finances.
Walmart forecast adjusted earnings per share for fiscal 2027 between $2.75 and $2.85, below Wall Street expectations of $2.91, while projecting annual net sales growth of 3.5% to 4.5%.
For the current quarter, the company said it expects adjusted earnings of 72 cents to 74 cents per share, slightly below analysts' forecasts of 75 cents, even as sales are projected to rise between 4% and 5%.
The softer guidance overshadowed an otherwise solid earnings report that showed shoppers are still spending, particularly online and on essential goods.
Quarterly revenue rose 7% to $177.8 billion in the period ended April 30, compared with $163.98 billion a year earlier. The figure topped analyst expectations of $174.98 billion.
Net income climbed to $5.33 billion, or 67 cents per share, from $4.49 billion, or 56 cents per share, a year earlier. Adjusted earnings matched analyst estimates at 66 cents per share.
Still, Walmart executives made clear that mounting fuel costs are emerging as a major concern for both the company and its customers.
"I think higher tax returns muted some of the pressure related to higher fuel prices and as we're in a period of time right now where those tax refunds are largely not coming in, I think consumers are going to feel more of that pressure from higher fuel prices," Walmart finance chief John David Rainey told CNBC.
"It's something that we're keeping a close eye on, but that expectation is built into our guidance for the second quarter," Rainey added.
The comments reflect a broader shift underway across the retail sector, where executives increasingly say consumers remain willing to spend but are becoming far more selective about how and where they allocate money.
According to Walmart, higher fuel expenses also directly affected the company's own operations.
Rainey said Walmart absorbed approximately $175 million in fuel-related costs during the quarter and warned the impact could intensify if energy prices remain elevated.
"It'll probably be larger than that in the second quarter if fuel prices stay where they are, so we're absorbing those prices and still maintaining our guidance, and I feel really good about that," he said.
The retailer's warning arrives as economic signals across the U.S. become increasingly mixed.
The University of Michigan consumer sentiment index fell to another record low in May, reflecting ongoing unease around inflation, borrowing costs and weakening purchasing power.
At the same time, retailers continue reporting relatively steady demand, especially in lower-cost discretionary categories and essentials.
Walmart said several parts of its business remained especially strong during the quarter:
- Global e-commerce sales rose 26%.
- Advertising revenue increased 37%.
- Grocery and household essentials continued driving store traffic.
Those faster-growing segments have become increasingly important for Walmart as the company attempts to offset rising transportation, labor and supply-chain costs.
Investors reacted negatively to Walmart's outlook despite the strong headline revenue numbers. Shares of the retailer fell roughly 2% in premarket trading after the earnings release.
