2026-08-20

Walmart (WMT) Beat on EPS and Revenue, Raised Guidance - and Still Fell 6-8% as U.S. Comp Sales Hit a Six-Year Low

Written & reviewed by the TradeSmrt editorial team · 2026-08-20

In this article

What Happened
Why a Beat-and-Raise Turned Into a Selloff
What to Take Away From This
FAQ
Sources

What Happened

On Thursday, August 20, Walmart (NYSE: WMT) - the largest U.S. retailer and the biggest company in the world by revenue - reported fiscal second-quarter results (May-July, FY27). On the surface, it looked like a clean earnings beat. Adjusted earnings per share came in at $0.81, seven cents ahead of the $0.74 consensus and up 19.1% year over year. Total revenue reached $187.9 billion, above the roughly $186.75 billion Wall Street expected and up 5.9% from a year earlier. Global e-commerce sales surged 23%. On top of all that, Walmart raised its full-year guidance. And yet the stock fell 6-7% in premarket trading, and briefly dropped more than 8% right after the open.

The paradox - beat on almost everything, sell off anyway - came down to a single number: U.S. comparable sales. Walmart U.S. comp sales excluding fuel grew just 2.6%, well short of the 3.67% the Street was looking for and the slowest pace in six years. More importantly, it was the first time in at least five years that Walmart missed on quarterly comparable sales. Through the pandemic, the inflation spike and the rate-hiking cycle, Walmart had reliably cleared its comp-sales bar, which is exactly why it's treated as a bellwether for the U.S. consumer - and why this miss stung far more than the raw figure suggests. Mizuho analyst David Bellinger called the print a "worst-case scenario" and "a very messy print and one of the biggest misses in years from WMT."

Why a Beat-and-Raise Turned Into a Selloff

First, for a mega-cap consumer stock like Walmart, the single metric investors check first isn't EPS - it's U.S. comparable sales. When a company is this large and this stable, the market reads the temperature of the consumer cycle through how fast existing stores are growing, not through the absolute size of the profit. The 2.6% figure said that thermometer just hit its coldest reading in six years, and that overwhelmed the EPS surprise and the 23% e-commerce growth entirely.

Second, the quality of the EPS beat wasn't great. Walmart's gross profit rate improved to 25.4%, but that was significantly boosted by a tariff refund. CFO John David Rainey told CNBC the company is eligible for $2.9 billion in tariff refunds, with just under $100 million left to receive. In fact, of the roughly 17% constant-currency adjusted operating income growth in the quarter, about 750 basis points came from that one-time refund benefit; strip it out, and underlying operating income growth was at the top end of the company's 7-10% guidance range. In other words, a meaningful chunk of the headline profit was non-recurring, and investors discounted it accordingly.

Third, the size of the guidance raise was too small to satisfy the market. Walmart lifted full-year adjusted EPS guidance to $2.80-$2.87 (from $2.75-$2.85) and constant-currency net sales growth guidance to 4-5% (from 3.5-4.5%). The direction was up, but given that the quarter had already pulled forward a large tariff-refund benefit, the increment was too modest to count as a genuine surprise. One brokerage put it plainly - even the raised outlook disappointed - because a small EPS bump doesn't reassure anyone when the core engine, comparable sales, is decelerating.

Fourth, the results confirmed the broader macro story that the American consumer is running out of room. Rainey said shoppers remain "stretched thin," especially with higher gasoline prices. Because Walmart is the go-to channel for lower- and middle-income households, softening comps here read as a wider warning about U.S. spending power, not just a company-specific stumble. A roughly 80-basis-point headwind from the health and wellness (pharmacy) category added to the pressure on comparable sales this quarter.

What to Take Away From This

A beat-and-raise doesn't automatically send a stock higher. Walmart beat on EPS and revenue and raised its outlook, yet the stock fell because the number the market actually cared about - U.S. comparable sales - came apart. When you read an earnings report, ask not just "what did it beat?" but "what happened to the single most important KPI?"
Every company has a different metric the market watches. For early-growth companies it's revenue growth; for banks it's net interest margin; for retailers it's comparable sales. The larger and more stable a consumer name like Walmart is, the more the direction of comps - not a single EPS line - drives the stock.
Check the quality of the earnings, not just the beat. A large share of this EPS beat came from a one-time tariff refund. Backing out non-recurring items to find the underlying growth rate is how you avoid being fooled by a flattering headline number.
Walmart is a consumer barometer. Because it's where lower- and middle-income households shop most, a slowdown in its comps can be a signal about overall U.S. spending power rather than a company-only issue - worth cross-checking against other retail and consumer names.
Read guidance for both direction and magnitude. An upward revision isn't enough on its own; what matters is whether the increment clears expectations already priced in. A small raise on top of a pulled-forward, one-time gain can read as a disappointment.

FAQ

Why did Walmart's stock drop even though it beat on EPS and revenue?

The metric investors watch most closely for Walmart is U.S. comparable sales, not EPS. This quarter, U.S. comp sales excluding fuel grew just 2.6%, far below the 3.67% consensus - the slowest in six years and the first comp miss in at least five years. That single miss overwhelmed the EPS surprise and the 23% e-commerce growth.

How did the tariff refund affect these results?

Walmart is eligible for $2.9 billion in tariff refunds, and that benefit meaningfully lifted the quarter's gross margin (25.4%) and adjusted operating income growth (roughly 750 basis points of the gain). The catch is that it's a one-time, non-recurring benefit, so the market discounted it from the headline profit. The company said it plans to use the funds to lower prices for shoppers starting in the third quarter.

What does Walmart's report say about the broader U.S. consumer?

Walmart is the primary channel for lower- and middle-income shoppers, which makes it a barometer for U.S. spending. The CFO said consumers remain stretched thin, particularly because of higher gas prices, and a six-year low in comparable-sales growth can be read as a broader sign that U.S. spending power is slowing.

Sources

This article is an original synthesis and analysis based on the reporting below, not a reproduction of the original articles. Please check the source articles directly for the most current figures.

⚠️ This article is for informational purposes only and is not investment advice. Market conditions change constantly - always verify the latest data before making investment decisions.