Walmart’s Softest Comps in Years Hide a Stronger Digital Engine

Walmart U.S. comparable sales rose 2.6 percent in the quarter ended July 31, the smallest gain in more than six years, after a roughly 125 basis-point hit from new pharmacy pricing rules. Global revenue still climbed 5.9 percent to $187.9 billion, e-commerce jumped 23 percent, advertising rose 38 percent, and the company raised its full-year sales and profit outlook.

Shares fell as much as 8 percent in early trading as investors focused on the comps miss versus estimates near 3.8 percent. The headline number is real. It is also incomplete.

What the Quarter Delivered

Total revenue reached $187.9 billion, up 5.9 percent as reported and 5.1 percent in constant currency. GAAP earnings per share came in at $0.80; adjusted EPS was $0.81, up 19.1 percent. Operating income rose 28.8 percent, or 17.4 percent on an adjusted constant-currency basis after stripping discrete items.

Walmart U.S. net sales hit $125.2 billion, up 3.5 percent. Sam’s Club U.S. comps excluding fuel rose 4.4 percent. International net sales grew 7.9 percent in constant currency. Global inventory sat at $61.6 billion, up 6.7 percent. Operating cash flow was $19.7 billion; free cash flow was $5.5 billion after heavier capital spending on the omnichannel build-out.

The full second-quarter results and guidance show share gains across categories and income cohorts, with upper-income households contributing the largest lifts. Transactions excluding fuel rose 1.5 percent; average ticket rose 1.1 percent. Like-for-like inflation ran about 1.4 percent.

That split between traffic and ticket is the clearest window into the quarter. More shoppers came through, and they still bought more units, yet the basket did not expand as fast as volume. The inflation print near 1.4 percent explains only part of the ticket gain; the rest is mix and category choice inside a cautious spend environment.

Pharmacy Rules Cut Deep Into Comps

New Maximum Fair Pricing rules tied to Medicare drug negotiations produced the bulk of the comps slowdown. Walmart quantified a roughly 125 basis-point headwind to U.S. comparable sales from pharmacy deflation. Health and wellness overall carried an 80 basis-point drag in some breakouts. Strip the pharmacy effect and the company said comps would have been closer to 3.4 percent or better, still below the 3.8 percent FactSet consensus that had already been lowered by several banks ahead of the print.

The rules stem from the Inflation Reduction Act’s Medicare Drug Price Negotiation Program. CMS publishes the Medicare negotiated maximum fair prices list for selected drugs; the caps pressure retail pharmacy revenue even as script counts and market share continue to grow in the mid-single digits. Walmart has absorbed the hit while still posting positive unit and transaction growth.

• Pharmacy headwind: ~125 bps to U.S. comps
• Underlying comps ex-pharmacy: roughly 3.4 percent-plus
• Script counts and share: still growing
• Consensus had already been cut into the low-to-mid 3s by some firms citing the same regulation

The regulation is not temporary noise. It is a structural feature of the pharmacy P&L for the foreseeable future.

Because the drag is price, not volume, it compresses the comps math without reversing the underlying demand signal. Script growth in the mid-single digits and continued share gains mean the pharmacy counter is still winning customers. The revenue per script is simply lower under the negotiated caps, and that arithmetic now runs through every quarterly comparison.

Digital Channels Supplied the Real Lift

E-commerce growth stayed in the mid-20s across the company. Global digital sales rose 23 percent and now represent about 24 percent of total net sales. Walmart U.S. e-commerce grew 24 percent; Sam’s Club U.S. rose 26 percent; International rose 19 percent. Store-fulfilled delivery remained the engine, with U.S. store-fulfilled channels up roughly 40 to 43 percent and nearly 37 percent of those orders expedited under three hours. Marketplace net sales climbed more than 50 percent in the U.S.

Advertising grew even faster. The global advertising business rose 38 percent. Walmart U.S. advertising also rose 38 percent, with Walmart Connect up 43 percent excluding VIZIO. Advertising improves the economics of every digital order and is recorded either in sales or as a cost-of-sales reduction depending on the arrangement.

The segment breakdowns and e-commerce contribution show e-commerce adding roughly 510 basis points to U.S. comps. That contribution has been climbing for several quarters. Digital mix is rising in every major market.

Key digital and high-margin figures:

• Global e-commerce: +23 percent, ~24 percent of net sales
• U.S. store-fulfilled delivery: ~40-43 percent growth, ~37 percent expedited
• Marketplace: +52 percent net sales in the U.S.
• Global ads / Connect: +38 percent / +43 percent ex-VIZIO

Store-fulfilled delivery at 40 to 43 percent growth is what turns the physical fleet into a same-day network. When nearly 37 percent of those orders move in under three hours, speed becomes part of the value pitch alongside price. Marketplace growth above 50 percent then widens assortment without a matching rise in owned inventory, which is why the digital mix can climb while the company still reports share gains in core categories.

Membership Fees and Tariff Refunds Fund the Price Fight

Global membership fee revenue rose 17 percent. Walmart+ delivered a record second-quarter net-add performance and double-digit fee growth. Sam’s Club membership income grew solidly on higher member counts and Plus penetration. Membership income is high-margin recurring revenue that cushions the business when ticket growth slows.

Gross margin expanded 96 basis points overall and 158 basis points in the U.S., helped by nearly $2.9 billion in IEEPA tariff refunds received in the quarter. Management said the net tariff benefit, after price investments, still left underlying adjusted operating-income growth at the top end of prior guidance. The company is deliberately pushing remaining refund value into lower prices and customer experience in the second half rather than letting it drop to the bottom line.

Our multi-year growth in eCommerce is evidence that customers are choosing Walmart because we deliver price, speed, and convenience across a broad assortment. At Walmart, they can have it all.

John Furner, President and CEO, Walmart

More than 11,000 rollbacks ran in U.S. stores during the quarter. The price posture is intentional: keep the traffic and the share, especially among higher-income households that have been trading into Walmart for value.

Membership fees and the tariff refunds work on different clocks. Fees are recurring and compound with net adds; the refunds are a one-time pool that management is spreading into price. Together they underwrite the rollback count and the decision to hold operating-income growth to the top end of prior guidance after reinvestment, rather than printing a larger near-term beat.

Where Customers and the Model Are Splitting

Traffic remains positive. Unit volumes are growing. The average ticket is the softer piece, and management and outside observers point to a stretched lower- and middle-income shopper watching every dollar while higher-income households keep adding trips. Sam’s Club, with its membership filter, continues to post stronger comps and unit growth.

The business model itself is shifting. Marketplace and fulfillment services now see nearly half of marketplace volume flowing through Walmart’s own logistics. Advertising and membership are diversifying the profit pool away from pure merchandise margin. International e-commerce economics improved, led by China, India and Canada. The company summary of Q2 FY27 performance repeatedly frames the result as a more durable, higher-return mix.

On X and in early market commentary, the dominant read was simpler: slowest U.S. sales growth in six-plus years equals a warning on the American consumer. That view drove the immediate stock reaction. The same posts often noted the revenue and EPS beats and the guidance raise in the next sentence, then returned to the comps number.

How Segment Growth Rates Compare

The 2.6 percent U.S. comps figure sits beside faster growth in every other major line. Sam’s Club and International outpaced the flagship banner, and digital outpaced stores. The gap is the story investors had to hold in one frame.

Sam’s Club’s membership filter and International’s constant-currency lift both clear the U.S. banner print by a wide margin. E-commerce at 23 percent global growth, and roughly 510 basis points of contribution to U.S. comps, is what keeps total revenue and operating income advancing even when the headline comparable rate cools. The mix is doing the work the ticket no longer does alone.

Raised Full-Year Outlook Meets a Soft Near-Term Guide

For the third quarter Walmart expects net sales growth of 3.0 to 3.75 percent and adjusted operating income growth of 2.0 to 4.0 percent in constant currency, with adjusted EPS of $0.62 to $0.64. The sales range includes more than 100 basis points of headwind from the timing of Flipkart’s Big Billion Days event shifting between Q3 and Q4. The operating-income outlook explicitly reflects continued reinvestment of tariff refunds into price and experience.

For the full fiscal year the company raised constant-currency net sales growth guidance to 4.0 to 5.0 percent (from the prior 3.5 to 4.5 percent range) and adjusted operating income growth to 7.0 to 8.5 percent. Adjusted EPS guidance moved to $2.80 to $2.87. Capital expenditures are expected near 4 percent of net sales.

CFO John David Rainey told investors to look at Q2 and Q3 together to judge underlying growth, precisely because the company is choosing to reinvest the tariff windfall rather than bank it. That choice protects long-term share and membership growth; it also left the near-term EPS guide light of some expectations and contributed to the sell-off.

Free cash flow declined year over year on the higher capex. Inventory growth outpaced sales slightly. Neither figure is a red flag on its own for a company still taking share and building fulfillment capacity, but both matter when the multiple already prices in clean, predictable execution.

The Flipkart calendar shift alone removes more than 100 basis points from the Q3 sales range, so the soft near-term guide is partly timing. The rest is the stated reinvestment of tariff refunds. Full-year sales and profit ranges still moved higher, which is management’s signal that the second half, taken together, supports a stronger exit rate than the Q3 window implies on its own.

Why Inventory and Capex Still Climb

Global inventory at $61.6 billion, up 6.7 percent, grew a step faster than sales. Free cash flow of $5.5 billion trailed the prior year because capital spending on the omnichannel build-out rose. Operating cash flow remained substantial at $19.7 billion, which is what funds that spend while the company still returns cash and runs thousands of rollbacks.

Capex near 4 percent of net sales for the year is the planned cost of store-fulfilled speed, marketplace logistics, and the advertising stack that grew 38 percent globally. Inventory above the sales growth rate is the working-capital side of the same bet: denser fulfillment and broader marketplace assortment need stock in the right nodes. For a retailer still posting share gains across income cohorts, that posture is consistent with the raised full-year sales range even when free cash flow dips in a heavy investment quarter.

• Operating cash flow: $19.7 billion
• Free cash flow: $5.5 billion after omnichannel capex
• Inventory: $61.6 billion, +6.7 percent
• Full-year capex plan: near 4 percent of net sales

The Optics Versus the Mix

Walmart delivered a revenue beat, an adjusted EPS beat, strong high-margin growth in e-commerce, advertising and membership, share gains across income groups, and a higher full-year sales and profit outlook. It also posted its slowest U.S. comparable-sales increase since 2020, guided soft for Q3 after reinvesting tariff benefits, and watched the stock drop sharply on the comps miss.

The pharmacy regulation is a lasting feature of the health-and-wellness line. The digital and membership engines are now large enough to carry more of the profit load. Management is using one-time tariff refunds to reinforce the price reputation that keeps upper-income households coming in. Those three facts sit underneath the 2.6 percent number that dominated the first hour of trading.

The next several quarters will show whether the mix shift continues to offset slower physical-store ticket growth, and whether the reinvestment in price keeps converting into transactions and membership adds. For now the company has raised the bar for the year while acknowledging that the consumer, especially at the lower end of the income spectrum, remains cautious.