Walmart’s U.S. comparable sales rose just 2.6% in the latest quarter, its slowest growth in more than six years, as lower-income shoppers remained cautious.
Higher-income households are still spending and Walmart continues to gain market share, suggesting the consumer slowdown is uneven rather than broad-based.
Walmart raised its full-year outlook, but executives described the consumer environment as softer and are leaning harder on price cuts to keep shoppers spending.
Walmart’s latest earnings offered a mixed diagnosis of the American consumer: Shoppers are still spending, but mounting pressure from higher everyday costs is making some households increasingly selective about where their money goes.
The country’s largest retailer said that U.S. comparable sales excluding fuel increased 2.6% in its fiscal second quarter, down from 4.1% in the previous quarter and the weakest growth in more than six years. The result fell short of Wall Street expectations.
That headline number looks somewhat worse than the underlying retail business. New rules lowering prices on some Medicare drugs created a sizable drag on Walmart’s pharmacy sales. Excluding health and wellness, comparable sales increased 3.4%. Transactions rose 1.5%, while the average amount customers spent per transaction increased 1.1%.
However, the results add to evidence that the U.S. consumer is losing some momentum after repeatedly defying predictions of a slowdown.
Using tariff refunds to cut prices
But the company said it is also working harder to give customers a reason to buy. Walmart received roughly $2.9 billion in tariff refunds during the quarter and is using some of that windfall to lower prices on thousands of products. The company said it is investing in prices because customers are looking for value, with additional discounts expected as it tries to offset some of the inflation hitting household budgets.
That strategy focuses on one of the central messages in the earnings report: Price sensitivity is becoming more important.
The Commerce Department reported last week that U.S. retail and food-service sales fell 0.6% in July from June, although they remained 5% higher than a year earlier. Walmart executives, meanwhile, described the current environment as softer than it was when the company issued its annual outlook in February.
The pressure is particularly visible among shoppers with less money to spare.
Lower-income consumers are more selective
Lower-income consumers have been more cautious, while households earning more than $100,000 continued to help drive Walmart’s market-share gains. Higher gasoline and food costs are forcing some shoppers to devote more of their budgets to necessities, leaving less room for discretionary purchases.
That divide matters because Walmart has increasingly attracted affluent consumers in recent years. The retailer’s ability to keep gaining share among those households gives it a cushion even as financially stretched customers pull back.
There are other signs that consumers have not simply stopped spending. Grocery, toys and fashion performed well during the quarter, and Walmart said it gained market share across income groups. Online shopping was particularly strong: Walmart U.S. e-commerce sales increased 24%, while store-fulfilled delivery grew 40%. Globally, e-commerce sales rose 23%.
That suggests consumers may be changing how and where they spend as much as how much they spend. Walmart’s combination of groceries, low prices and increasingly fast delivery can make it a beneficiary when households become more value-conscious.