Walmart Rattles Investors with Slowing Sales-Growth Forecast

As the country’s biggest private employer and biggest retailer, Walmart has an unparalleled view into the lives of US workers and consumers. The quarterly reports from its Bentonville, Ark., headquarters are the retail market equivalent of encyclicals from Rome.

On Thursday, the company’s executives suggested that shoppers confronting soaring energy prices may be running out of gas and offered a conservative outlook. It was enough to rattle the faith of some investors, with Walmart shares falling 7.3%.

Future Imperfect

Walmart had a fine quarter. In the period from February to April, profit at the company climbed 19% year over year to $5.3 billion, in line with Wall Street’s expectations, and sales jumped 7.3% to $178 billion, beating expectations. That capped a relatively impressive week for big box retailers, which also saw Home Depot, Lowe’s and Target top estimates. The implication is that consumers’ devotion to shopping didn’t wane in recent weeks, despite the gloom around inflation and gas prices resulting from the Iran conflict.

What sent Walmart shares tumbling Thursday was a warning from executives that sales growth will slow to 4% to 5% from May to July, as the elevated cost of living tests consumers’ willingness to part with their hard-earned, less valuable dollars. To make matters more difficult, some conditions that have eased the pain of inflation (up 3.8% in April on an annualized basis) are sunsetting: 

• On a call with analysts Thursday, Chief Financial Officer John David Rainey noted the company “probably saw some benefit from tax refunds,” which gave consumers an extra financial cushion. In part because of the One Big Beautiful Bill Act, the average tax refund this year is up 11% to $3,462, according to IRS data.
• Rainey also warned that if the Strait of Hormuz remains closed, food prices “heavily dependent upon fertilizer, nitrogen and phosphates” shipped through the Persian Gulf will go up. Fuel prices, too, he said, will lead to “upward pressure on average unit retail prices.”

Passing on Gas: The average price of a gallon of gas in the US is $4.56, up from $3 when the US attacked Iran in late February, according to AAA. Rainey said Walmart, which operates over 400 gas stations, is seeing consumers pare back on gas purchases the most in years: “In the most recent period, the number of gallons that customers fill up with when they come to our fuel stations fell below 10 for the first time since 2022. That’s an indication of stress.”