Walmart quarterly comparable sales rise 2.6%, smallest gain in years

Net income falls 9.4% as e-commerce sales rise 24%

Walmart reported a 2.6% rise in U.S. comparable sales for its second quarter ended July 31, the smallest quarterly comparable-sales gain in years and below analyst estimates of 3.8%, according to FactSet. The retailer raised its full-year guidance, with shares sliding 6% before the opening bell on Thursday.

Comparable sales — a measure of sales at U.S. stores open at least a year that includes digital sales tied to those locations — rose 2.6% in the quarter, down from a 4.1% increase in the first quarter. Excluding Walmart’s wellness category that includes pharmacies, comparable sales increased 3.4%. The retailer said pharmacy sales were affected by federal legislation that requires pharmacies to dispense some high-cost Medicare drugs at capped prices.

Total net sales for the quarter rose 5.9% to $186.1 billion. Net income fell 9.4% to $6.37 billion as the decline of some equity investments weighed on profits.

Walmart raised its full-year estimates. The retailer now expects net sales to increase 4% to 5% for the full year, up from a previous estimate of 3.5% to 4.5%. Operating income is expected to rise 7% to 8.5%, up from a 6% to 8% range set earlier in the year.

U.S. online sales rose 24% in the quarter, down from 26% in the first quarter. That figure includes Walmart’s advertising-revenue business, which sells ads that run in its digital channels and in its stores. E-commerce now accounts for nearly a quarter of overall sales.

“The relevance of store comps, I think, is not as pertinent as it was a decade ago,” said Walmart Chief Financial Officer John David Rainey. Items ordered online and picked up in store parking lots are counted as e-commerce sales, Rainey said, making stores increasingly a digital-fulfillment node that enables speedy delivery. “It’s a legacy fixation,” he said. “We are not the Walmart of a decade ago.” Top executives are discussing whether to report store-fulfilled sales differently to better reflect the company’s current business model, Rainey added.

Walmart said sales of groceries, toys, fashion and private brands were strong during the quarter, and that it was gaining market share broadly, especially among households earning $100,000 a year or more — a category the retailer refers to as “higher-income households.” Lower-income shoppers continued to spend cautiously but were still spending, Rainey said. “It appears there were choices between necessities within the quarter because of where gas prices are,” he said.

Walmart is among the first batch of major retailers to report second-quarter results, which could offer industry analysts and economists another read on whether ongoing price pressures from the conflict in Iran impacted consumer behavior.