Dive Brief:
- Walmart U.S.’s grocery category recorded mid-single-digit comps growth in its second quarter of fiscal 2027, led by strong growth in unit volumes and share gains, according to the retailer’s earnings presentation.
- Walmart’s U.S. comparable-store sales excluding fuel rose 2.6 % in Q2 — the slowest growth rate for that metric since the fourth quarter of fiscal 2020. Pricing changes for certain drugs under the Inflation Reduction Act held back Q2 comps by 1.25 percentage points, company executives said on the Thursday morning earnings call.
- Walmart’s Q2 earnings showed the retailer is taking financial hits from the same forces battering supermarkets — pharmacy headwinds linked to the Inflation Reduction Act, cautious consumer spending and high fuel prices — but the retailer sees some key competitive advantages against traditional food retailers. “Our price gaps to conventional grocers here in the U.S. are strong, and they continue to widen,” CEO and President John Furner told investors.
Dive Insight:
As Walmart grapples with financial headwinds stemming primarily from GLP-1 price changes, executives stressed that temporary price cuts, speedy e-commerce offerings and expanded meal solutions are key ways the retailer is appealing to customers.
“As you go through month by month in the last quarter, you can tell when fuel prices increase and got above $4 — and perhaps there's a psychological impact to that — that there are choices that consumers are making,” CFO John David Rainey said on the call.
Until Q2, Walmart had recorded U.S. comp sales growth of around 4% or higher in every quarter for almost three years. Rainey told investors that its Q2 comps growth of 2.6% was due to the pharmacy impact in its health and wellness sales.
As profit margins improve for its e-commerce business — which now accounts for over 23% of its U.S. sales — the retailer is “becoming increasingly agnostic about channel dynamics while enabling customers to shop on their terms,” Rainey said.
Walmart’s stores are playing an essential role in Walmart’s digital growth, Rainey added.
“The more omni[channel] we become, the more important our stores become — not less important, more important,” he said. “Between in-store shopping and digital fulfillment, we have more unit volumes transacted through our stores than ever before, as they are the last-mile fulfillment nodes for 80% of our e-commerce orders and 100% of our fast deliveries.”
During Q1, Walmart opened one Neighborhood Market store and completed approximately 220 remodels.
Speedy e-commerce is a key way Walmart is bringing in and retaining customers, Furner said. As the company expands how customers can shop the retailer, it is also building out its food delivery capabilities, he noted. In June, Subway became the first restaurant integrated with Walmart’s Express Delivery option through a partnership that allows shoppers to order Subway meals through the retailer’s app or Walmart.com for delivery within 30 minutes.
“In the past, customers may have thought about Walmart primarily for groceries and general merchandise. Today, we’re expanding beyond that,” Furner said. “Meal solutions, prepared food partnerships like the one we announced with Subway and faster fulfillment allow us to participate in a much broader share of everyday food spending.”
Walmart U.S. hit its slowest comps sales growth since the end of its fiscal 2020
Walmart+ membership fee revenue hit an all-time high of 17% growth, executives noted on the earnings call, adding that the membership program is another way the retailer looks to provide value to its customers.
The retailer has doubled down on temporary price cuts as a marquee effort to build rapport with consumers worn down by affordability concerns. Walmart U.S. rolled out temporary price cuts on more than 11,000 items during Q2 — up from 7,200 at the end of Q1, Furner said.
“Having the best prices across a basket of goods helps us continue to build trust with our customers and members by helping them save money at a time when many households are carefully managing their budgets,” Furner said.
The retailer raised its net sales guidance for fiscal 2027. Walmart now expects sales to rise between 4% to 5% during the year, up from its earlier forecast of 3.5% to 4.5%.
