Walmart Posts Slowest Sales Growth in Six Years

Walmart reported its slowest U.S. comparable sales growth in more than six years on Thursday, signaling that American consumers are increasingly feeling the squeeze from elevated gas prices and persistent inflation. The retail giant’s comparable U.S. sales rose just 2.6% in the second quarter ended July 31, missing analyst expectations of 3.7% to 3.8% and marking the smallest increase since 2020, according to the NY Post.

A Bellwether Under Pressure

As the nation’s largest retailer and largest private employer, Walmart’s quarterly earnings are widely viewed as a critical gauge of consumer health. The slowdown from 4.1% comparable sales growth in the first quarter comes amid a challenging economic backdrop: the national average for a gallon of regular gas has soared from $2.98 before the Iran war began in February to $4.10 as of Thursday, while inflation in July ran at 3.4%, outpacing wage growth of 3.2%, as NBC News reported.

“It appears there were choices between necessities within the quarter because of where gas prices are,” Walmart CFO John David Rainey said, according to the NY Post.

Walmart CEO John Furner echoed that sentiment: “Customers tell us they’re still feeling some pressure. 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,” he said, as reported by NBC News.

Tariff Refunds Soften the Blow

Despite the sluggish sales growth, Walmart’s financial results were bolstered by a significant windfall. The company received approximately $2.9 billion in tariff refunds following the Supreme Court’s February ruling that struck down Trump administration tariffs imposed under the International Emergency Economic Powers Act (IEEPA), according to CBS News.

The refunds helped boost operating income by 28.8% and allowed Walmart to execute more than 11,000 price rollbacks in the quarter, up from 7,200 in the first quarter. Total revenue rose 5.9% to $186.1 billion, though net income fell 9.4% to $6.4 billion.

“We’re investing heavily in price because customers need us to and because we believe it drives market share gains over time,” Rainey said, according to CBS News.

The U.S. government has already refunded approximately $100 billion in IEEPA tariffs as of July 31, according to a court filing by U.S. Customs and Border Protection, as France24/AFP noted.

Market Reaction and Investor Concerns

Wall Street reacted swiftly to the lukewarm sales figures. Walmart’s stock fell as much as 9% on Thursday to a 2026 low, and shares are now down more than 20% from their May peak. The company has also fallen out of the $1 trillion market cap club, as Business Insider reported.

Average spending per transaction grew only 1.1% in the quarter, down sharply from 3.1% growth a year ago, signaling that shoppers are cutting back on discretionary purchases.

Walmart also cited new federal drug pricing rules that slashed prices on several expensive medications for Medicare enrollees, creating a 0.8% headwind to comparable sales. The company additionally expects more than $2 billion in incremental fuel-related cost headwinds for 2026 due to higher oil prices stemming from the Iran war.

What Analysts Are Saying

Opinions are divided on whether Walmart’s slowdown signals broader economic trouble or is simply a temporary blip. Neil Saunders, managing director at GlobalData Retail, warned that the deterioration “will set some alarm bells ringing over whether the consumer is running out of steam,” according to France24/AFP.

However, Michael Lasser, senior analyst at UBS, said the investment thesis remains intact: “Although Walmart missed the market’s comp-store sales expectation of 3% to 3.5%, we do not view the investment thesis as structurally changed,” he said, as reported by Forbes.

John Harmon, managing director of technology research at Coresight Research, noted that “consumers in all income brackets are seeking value. Walmart is extremely well-positioned.”

Digital Transformation Continues

Amid the challenges, Walmart’s digital pivot remains a bright spot. U.S. e-commerce sales rose 24% in the quarter, while advertising revenue is growing at a 40% clip. The company also raised its full-year guidance, now expecting net sales to rise 4% to 5% and operating income to jump 7% to 8.5%.

“We haven’t had this kind of growth in two decades,” Furner said, according to Forbes. “It’s different, it’s being driven by advertising, membership and data services.”

What to Watch

With consumer spending accounting for roughly 70% of U.S. GDP, the slowdown at Walmart - combined with the 0.6% drop in July retail sales - raises questions about the broader economic outlook. Goldman Sachs analysts project real consumer spending growth could slow to as low as 1% in the second half of 2026.

Rainey warned that if elevated oil prices persist, consumers could face further price increases: “There’s a limit to what companies can absorb,” he told CNBC, according to France24/AFP. “Higher oil prices is likely going to translate into higher prices for the consumer if it sustains at this level.”

Whether Walmart’s aggressive price investments can sustain market share gains - and whether the American consumer can weather continued economic pressure - will be key questions in the months ahead.