Walmart's profits fall short of expectations for the first time in three years, citing rising tariff costs and raising full-year sales guidance | Earnings Report Insights

Walmart's second-quarter revenue exceeded expectations, with its e-commerce business continuing to show strong growth momentum, and it raised its full-year sales and profit forecasts. However, due to the impact of tariffs and rising costs, its profits fell short of expectations for the first time in three years.

The financial report released on Thursday showed:

Walmart's second-quarter revenue reached $177.4 billion, surpassing analysts' expectations of $176.16 billion.

Walmart's same-store sales in the U.S. grew by 4.6%, higher than analysts' expectations of 4%, with e-commerce sales in the U.S. growing by 26%.

Adjusted earnings per share were $0.68, below the expected $0.74, marking the first time in three years that it fell short of expectations. Increased insurance claims, legal fees, and restructuring costs were the main drag factors.

Chief Financial Officer John David Rainey stated in the earnings report that the cost impact of tariffs "is continuing to rise," but the company is working to maintain its low-price strategy by accelerating imports and increasing limited-time discounts.

Walmart raised its net sales growth forecast for fiscal year 2026 from the previous 3%-4% to 3.75%-4.75%, and adjusted earnings per share expectations were also slightly raised to $2.52-$2.62.

As a result of the earnings miss, Walmart's stock price fell more than 3% in pre-market trading, with investors expressing concerns about the potential impact of rising tariff costs on retail profit margins.

Strong Growth in E-commerce Business

Walmart's e-commerce business continues to show strong growth momentum, with global e-commerce sales growing by 25% and 26% in the U.S. market. The company's grocery and other merchandise sales through store delivery grew nearly 50% year-on-year, with one-third of orders being expedited deliveries.

CEO Doug McMillon stated in the earnings report: "The revenue growth momentum of our business comes from innovation and execution. Connecting with customers and members through digital experiences is driving our business growth, and the way we deploy artificial intelligence will enhance these experiences."

The company performed particularly well in the grocery and health care categories, driving sales growth in the U.S. Walmart achieved market share growth across "all income levels" in U.S. stores, with particularly notable growth among high-income households.

Struggling to Maintain Low Prices Under Tariff Pressure

In the face of rising tariff costs, Walmart is taking multiple measures to maintain its low-price competitive advantage.

Rainey stated that the company manages tariff impacts "item by item, category by category," fully absorbing higher tariff costs in some areas, while in others, it has had to pass some costs onto consumers.

Among about 50 products at Walmart, some prices have already increased this summer, including frying pans, jeans, and car seats. Approximately one-third of the products sold in the U.S. come from overseas, with major import markets including China, Mexico, Canada, Vietnam, and India Despite facing tariff pressures, Rainey stated that Walmart has not observed any changes in consumer spending patterns. Sales of private label products remained essentially flat year-on-year, and these products are typically priced lower than national brands.

Sam's Club Outperforms Expectations

In other details, Walmart's net profit for the second quarter surged to $7.03 billion, or $0.88 per share, far exceeding last year's $4.5 billion or $0.56 per share. Foot traffic in the U.S. business increased by 1.5%, and the average transaction value rose by 3.1%, indicating that consumers are shopping more frequently and spending more per visit.

Same-store sales at Sam's Club grew by 5.9%, surpassing analysts' expectations of 5.2%. By the end of the quarter, Sam's Club inventory increased by approximately 3.5%, while Walmart's U.S. business inventory grew by 2.2%, preparing for the second half of the fiscal year and the critical holiday shopping season.

Bank of America analyst Robert Ohmes estimated that about 15% of Walmart's U.S. sales come from imports from China, and approximately 60% of U.S. sales are groceries, which are mostly exempt from tariffs if produced in the U.S. or in Mexico and Canada