Walmart Beats Estimates, Trims Outlook; Shares Slide 6%

Walmart beat Wall Street's second-quarter estimates on Thursday and then told investors the rest of the year will be softer than they expected. Shares slid 6% before the opening bell.

Sales rose 5.9% to $187.94 billion in the three months ended July 31, ahead of the $186.62 billion analysts predicted, according to FactSet. Adjusted earnings came in at 81 cents a share against the 74 cents Wall Street looked for.

The outlook is where the mood changed. For the third quarter Walmart guided to 62 to 64 cents a share and sales growth of 3% to 3.5%. Analysts had penciled in 68 cents and $188.19 billion.

For the full year, Walmart now expects $2.80 to $2.87 a share and sales up 4% to 5%. Analysts expected $2.90 a share and $752.06 billion in sales.

What the numbers say about the American shopper

Comparable sales at U.S. stores — stores open at least a year, plus online sales tied to them — rose 2.6%. That is a step down from the 4.1% increase in the first quarter.

Strip out the wellness category that includes Walmart's pharmacies and comparable sales rose 3.4%. Walmart said the pharmacy line was hit by federal legislation requiring pharmacies to dispense some high-cost Medicare drugs at capped prices.

U.S. online sales rose 24%, down from 26% in the first quarter.

Walmart is treated as a barometer of consumer spending for a simple reason: the company says more than 150 million customers are in its stores or on its website every week. Its biggest market share gains are coming from households making more than $100,000 a year — wealthier shoppers trading down into the same aisles.

Walmart is among the first major retailers to report second-quarter results, which analysts and economists read as a gauge of whether price pressures from the conflict in Iran have changed how Americans shop. The backdrop is not encouraging: U.S. data released last Friday showed retail sales were surprisingly weak in July, and a University of Michigan reading found growing pessimism among Americans struggling with higher costs for gas, groceries and nearly everything else.