Walmart stock falls after earnings, profit outlook misses forecasts as US sales growth accelerates

Walmart's stock declined over 4% after its Q2 adjusted EPS of $0.68 missed the $0.74 forecast, its first miss since May 2022, attributed to one-time legal and restructuring charges. Despite the earnings miss, the retailer exceeded revenue expectations with $177.4 billion and reported robust US same-store sales growth of 4.6%, surpassing the 4.2% forecast, driven by its low-price strategy, strength in grocery and health/wellness, and increased penetration across income brackets. The company also raised its fiscal 2026 net sales growth outlook to 3.75%-4.75%, signaling confidence in top-line performance despite the current quarter's profitability pressures.

Analysis

Walmart's stock declined over 4% as the market reacted to a second-quarter adjusted earnings miss, the first since May 2022, with EPS of $0.68 falling short of the $0.74 consensus forecast. This earnings shortfall was explicitly attributed to one-time charges related to legal and restructuring matters, rather than a fundamental operational weakness. In contrast, the company's top-line performance was robust, with revenue of $177.4 billion surpassing the $176.05 billion expectation. Core operational health was demonstrated by strong US same-store sales growth of 4.6%, which not only beat the 4.2% forecast but also accelerated from the previous quarter. This growth was driven by the company's low-price strategy resonating with consumers facing tariff-related uncertainty, leading to market share gains across all income brackets, notably including upper-income households. Looking forward, management signaled confidence in its sales momentum by raising its fiscal 2026 net sales growth guidance to a range of 3.75%-4.75%, up from 3%-4%. However, the full-year adjusted EPS guidance of $2.52-$2.62 has a midpoint slightly below the Street's $2.61 estimate, suggesting potential ongoing pressure on profitability despite the strong sales outlook.

Key Decisions for Investors

• Consider the post-earnings stock decline as a potential entry point, as the negative reaction was driven by an EPS miss attributed to one-time charges, while key operational metrics like revenue and same-store sales growth showed significant strength.
• Closely monitor future margin performance, as the full-year EPS guidance midpoint comes in slightly below consensus, suggesting that while top-line growth is robust, profitability pressures may extend beyond the recent one-time charges.
• The results reinforce Walmart's role as a defensive holding, as its value proposition is effectively capturing consumer spending across all income brackets during a period of economic uncertainty, validating its business model's resilience.