Walmart shares tumbled about 7.5% in premarket trading Thursday despite stronger-than-expected quarterly results and an improved full-year forecast, as investors focused on softer U.S. comparable sales and signs that consumers remain under pressure from higher living costs.
The retail giant said revenue increased 5.9% in its fiscal second quarter, with digital demand providing much of the momentum. E-commerce sales surged 23%, extending Walmart's push to capture more spending online while using its enormous store network to support delivery and pickup operations.
The weakness emerged in Walmart's core U.S. business. Comparable sales increased 2.6%, missing the 3.5% growth analysts had expected, according to CNBC. The shortfall appeared to outweigh the company's broader revenue gains in investors' initial reaction to the report.
Walmart nevertheless raised its outlook, signaling that management expects the business to maintain its momentum during the remainder of the year. The company now expects net sales to increase between 3% and 3.75%, while adjusted earnings are projected at 62 cents to 64 cents a share.
Chief Financial Officer John David Rainey defended the underlying performance in an interview with CNBC, saying Walmart's "business is strong" and that management feels "really good about the progress" the company is making.
One potential boost is expected to come from tariffs. Rainey said Walmart is eligible to receive approximately $2.9 billion in tariff refunds, money the retailer intends to use to help reduce prices rather than simply retain as a financial windfall.
The effects of that strategy should begin appearing during the fiscal third quarter, according to Rainey. For Walmart, lower prices could reinforce one of its biggest competitive advantages at a time when households are becoming increasingly sensitive to the cost of everyday purchases.
The tariff refunds are particularly significant because consumers are contending with renewed pressure on household budgets, including higher gasoline costs associated with the war in Iran. Rising energy prices can ripple through family finances by increasing commuting expenses while also raising transportation and distribution costs across the economy.
Walmart hasn't seen consumers stop spending altogether. Rainey said households have remained surprisingly durable despite those pressures, supported partly by wage gains that have helped offset increases in expenses.
"But consumers are still spending, and real wage growth is keeping pace, and so they've been very resilient in this environment," Rainey told CNBC.
The CFO acknowledged, however, that Walmart would prefer to see greater relief for shoppers. "But all that said, we would love to be able to bring prices down more and see less pressure on their wallets," he said.
