Walmart Shares Plunge as US Consumer Spending Retreats Amid Rising Costs

Walmart stock slumped more than 9 percent in midday trading on Thursday, August 20, as sales dropped due to a pullback in US consumer spending. According to the company's most recent earnings report, the economic impact of tariffs and United States' tensions with Iran are weighing heavily on shoppers, leading to the slowest quarterly increase in six years with US same-store sales rising just 2.6 percent compared to the 3.8 percent forecast by analysts at LSEG.

CFO John David Rainey pointed to heightened petrol prices as a primary driver for the slowdown during a call with analysts on Thursday, noting that when fuel prices exceed $4, consumers experience a psychological impact and make trade-offs. The American Automobile Association reported that the average price for a gallon of petrol rose to $4.10, up from $4.07 the previous week, and significantly higher than the $2.98 average recorded when the US and Israel first struck Iran. Consequently, Walmart expects $2bn in incremental fuel-related costs above its original guidance.

Overall quarterly revenue rose 3.4 percent, marking the slowest pace since the first quarter of fiscal 2023, with sales dipping in the US pharmacy business and other sectors. This trend aligns with data from the US Labor Department's Bureau of Labor Statistics showing consumer inflation ticking up 0.1 percent from the previous month and 3.4 percent year-over-year, alongside a 0.6 percent drop in overall retail sales in July reported by the US Commerce Department.

In response to market pressures, Walmart announced price cuts on Wednesday across 11,000 items, partially funded by $2.9bn in tariff refunds, echoing similar strategies from competitors like Target. While physical store foot traffic slowed to a 1.5 percent increase for the quarter, Walmart's e-commerce sales surged 24 percent in the US, prompting the company to upgrade its net sales growth forecast from 3.5–4.5 percent to 4–5 percent.

Other big-box retailers also reflected a broader slowdown in consumer spending. TJX, the parent company of TJ Maxx and Marshalls, reported 1 percent sales growth, while Target saw net sales jump 5.3 percent to $26.5bn, driven by a 3.6 percent rise in in-store traffic after cutting prices on more than 10,000 items and receiving a $1bn tariff refund. On Wall Street, Walmart shares took a significant hit, down 9.6 percent, while TJX stock fell 1.7 percent and Target dropped 0.1 percent.