- Walmart reported Q2 FY2027 U.S. comparable sales growth of 2.6%, the slowest pace in over six years, missing analyst expectations of roughly 3.1%.
- The company cited deflationary pressure in general merchandise and a sharp decline in drug prices as key drags on U.S. comparable sales.
- Adjusted earnings per share came in at $0.67, beating the consensus estimate of $0.65, while total revenue rose 4.8% year-over-year to $169.3 billion.
- Walmart narrowed its full-year guidance, now expecting consolidated net sales growth of 3.5% to 4.5% and adjusted EPS of $2.75 to $2.85, citing a more cautious consumer environment.
- Shares fell approximately 6% in premarket trading following the earnings release, before paring losses after management reaffirmed its operating income growth outlook.
Drug Price Deflation Hits Core U.S. Business
Walmart’s second-quarter results, reported on August 20, 2026, revealed a notable slowdown in its flagship U.S. segment. Comparable sales in the U.S. rose just 2.6% year-over-year, the weakest print since early 2020, and below the 3.1% that Wall Street had penciled in. Management attributed a significant portion of the miss to falling pharmaceutical prices, a trend that has accelerated as generic drug costs continue to decline and as new pricing models from major manufacturers take hold. “We are seeing genuine deflation in the pharmacy aisle, and that is flowing directly through to our comp numbers,” CFO John David Rainey said on the earnings call, noting that the drug price impact alone shaved roughly 70 basis points off U.S. comparable sales.
Beyond pharmacy, general merchandise remained under pressure, with categories like electronics and home goods posting flat-to-negative comps as consumers continue to prioritize food and consumables. Grocery, however, remained a relative bright spot, with mid-single-digit comp growth driven by market share gains in fresh and private-label offerings. The company noted that its e-commerce business in the U.S. grew 12% year-over-year, though that was a deceleration from the 18% clip seen in the prior quarter, as delivery and pickup order growth normalized.
Margin Resilience and Cost Discipline
Management was careful to frame the quarter as a story of disciplined execution in a softer demand environment. “We are not seeing a consumer collapse, but we are seeing a more selective shopper who is trading down within categories and waiting for promotions,” Rainey added. The company’s inventory levels were down 2.3% year-over-year, a sign that it is keeping shelves lean and reducing the need for clearance activity, which helped protect gross margins.
Guidance Trimmed, But Not Broken
Walmart narrowed its full-year guidance, now calling for consolidated net sales growth of 3.5% to 4.5%, down from a prior range of 4.0% to 5.0%. The company also adjusted its adjusted EPS outlook to $2.75 to $2.85, versus a previous $2.80 to $2.90. The revision reflects the drug price headwind and a more conservative view on discretionary spending in the back half of the year. However, management maintained its expectation for operating income growth of 4% to 6% in constant currency, signaling that cost savings and higher-margin revenue streams can offset some of the sales pressure.
Investors initially punished the stock, sending shares down as much as 6% in premarket trading, but the selloff moderated after the company reiterated its operating income guidance and noted that July comparable sales trends had improved slightly versus the quarter’s average. Analysts were split on the print. “The drug price issue is real and may persist for another couple of quarters, but Walmart’s ability to grow operating income faster than sales is a testament to its business model evolution,” said a retail analyst at a major investment bank. Others cautioned that a sustained slowdown in U.S. comps, if it continues into the holiday quarter, could force a more meaningful guidance cut.
Looking ahead, Walmart faces a mixed macro backdrop. U.S. consumer confidence has ticked down in recent months, and the labor market is cooling, but real wage growth remains positive. The company’s international segment, which grew sales 7.1% in constant currency, continues to provide diversification, with strong performance in Mexico, China, and India. For now, Walmart remains a defensive holding for many investors, but Tuesday’s report underscores that even the largest retailer is not immune to sector-specific deflation and a more frugal American shopper.
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