Walmart beat Wall Street’s second-quarter revenue and earnings estimates, helped by tariff refunds and despite price pressure on GLP-1 weight-loss medications.
Walmart reported that it received $2.9 billion in IEEPA tariff refunds and intends to use the recoveries to reduce prices and improve the customer experience.
Company net income was $6.37 billion, or 80 cents per diluted share, versus $7.03 billion, or 88 cents per diluted share, in the year-previous quarter.
Adjusted for one-time events, earnings per share were 81 cents, up from 68 cents in the prior-year period, the company indicated.
An analyst consensus estimate published by Zack Investment Research called for earnings per adjusted diluted share of 73 cents and revenues at $186.26 billion.
Net sales were $186.1 billion versus $175.75 billion and total revenues were $187.94 billion versus $177.4 billion in the year-earlier quarter. Operating income was $9.38 billion versus $7.29 billion in the year-prior period, Walmart maintained, while adjusted operating income was $9.25 billion versus $7.88 billion.
At Walmart U.S., comparable sales were up 2.6% year over year, excluding the effects of fuel price volatility, driven by a 1.5% increase in transactions and a 1.1% increase in average ticket. Net sales were $125.2 billion versus $120.9 billion in the year-over-year period. Operating income was up, reaching $8.12 billion from $6.73 billion.
At Sam’s Club, comps were up 4.4% in the quarter year over year, sans the effects of fuel price volatility, based on a 7% increase in transactions and a 2.5% decrease in average ticket. Net sales were $25.7 billion versus $23.6 billion in the year-past period. Operating income was up, reaching $678 million from $470 million year over year, while adjusted operating income was $678 million versus $550 million.
In company highlights from the quarter, Walmart noted that membership fee revenue grew 17% globally, and global e-commerce sales grew 23%, led by store-fulfilled pickup and delivery and marketplace.
As for guidance, Walmart adjusted its outlook on net sales growth, now at 4% to 5% from 3.5% to 4.5% and adjusted earnings per share to $2.80 to $2.87 from $2.75 to $2.85.
In reviewing the second quarter, John Furner, Walmart president and CEO, said in a conference call: “The underlying business continued to perform well in the quarter and was largely in line with our expectations, which assumed a slight moderation in sales growth from the first quarter. Overall, we continued to gain market share. We grew units and transactions, and membership fee revenue reached an all-time high, up 17%. We delivered another quarter of strong e-commerce growth, up 23% globally, including the 10th consecutive quarter of growth over 20% for Walmart U.S.”
Furner addressed tariff refunds in the call, saying: “Adjusted operating income grew 17.4% in constant currency. This includes the benefit from receiving tariff refunds in the quarter. As we suggested on the last call, our intent was to deploy much of that back into price, and that’s what we’re doing. Importantly, our underlying profit growth was where we thought it would be, excluding this benefit.”
Furner also touched on artificial intelligence initiatives, pointing out: “We’re using AI to make our work easier and help our associates grow and be at their very best. We believe AI will improve nearly every part of our business by making shopping better and our associates’ work easier. Sparky is a great example. The number of customers using Sparky is up 70% from last year, and the customers and members who use Sparky for shopping spend 40% more per order than others who do not.”
John David Rainey, executive vice president and CFO, pointed out in the conference call that Walmart had received substantially all of the $2.9 billion in tariff refunds it was due. Walmart is taking a disciplined approach to investing refund dollars in customer experience and price leadership, he stated, with the grocery and general merchandise categories as priorities.
Rainey said in-store Walmart U.S. comps “were down low single digits in Q2, consistent with a trend that began in late Q4 last year.. He said all categories but health and wellness posted positive in-store comps, citing a sales dip due to a shifting price mix of GLP-1 drugs after the introduction of generic versions of some older medications in the class. Also, the implementation of Maximum Fair Price, with Medicare price caps on designated drugs, had an impact.
In the conference call, David Guggina, president and CEO of Walmart U.S., called out a highlight of the back-to-school season, saying: “Decor outperformed across the back-to-college home business. Areas to call out would be candles, throws, rugs and lamps.”
