Walmart stock selloff explained: Here’s what spooked investors

Walmart delivered a stronger-than-expected second quarter, with revenue and adjusted earnings beating Wall Street estimates. Yet the stock plunged sharply as investors focused on weaker U.S. comparable sales and a cautious near-term outlook. Shares fell 9.2% on August 20, marking their biggest one-day decline in more than four years, according to The Wall Street Journal. (Sources: Zacks, TradingKey)

Walmart reported second-quarter revenue of about $187.9 billion, up 5.9% year over year. The figure exceeded the Zacks consensus estimate of $186.26 billion, highlighting continued sales momentum despite concerns around consumer spending.

Adjusted earnings came in at $0.81 per share, compared with the Zacks consensus estimate of $0.73. That represented an earnings surprise of nearly 11%, with adjusted EPS also rising from $0.68 a year earlier.

The market looked beyond the headline earnings beat. Walmart's U.S. comparable sales growth slowed to 2.6%, its weakest pace in more than six years, versus Wall Street expectations of around 3.8%. The weaker figure raised concerns about the health of the American consumer.

Walmart's digital business continued to expand rapidly. Global e-commerce sales increased 23%-24%, while advertising revenue jumped 38% and membership revenue increased 17%. These higher-growth businesses are becoming increasingly important to Walmart's overall growth strategy.

Walmart benefited from a $2.9 billion tariff refund, which helped lift its gross profit rate and operating income. However, management plans to use the benefit partly to keep prices low and invest in price competitiveness, limiting the extent to which the refund translates into lasting earnings gains. TradingKey highlighted this as one of the factors investors need to watch.

Walmart raised its full-year FY2027 outlook, targeting 4%-5% sales growth and adjusted EPS of $2.80-$2.87. However, the company's third-quarter outlook was more cautious, with sales growth projected at roughly 3%-3.75% and adjusted EPS of $0.62-$0.64, below market expectations.

Walmart's quarter was not bad on the headline numbers. Revenue and adjusted earnings beat estimates, e-commerce remained strong and full-year guidance was raised. But investors appear more concerned about slowing U.S. comparable sales, cautious consumers and weaker near-term guidance.