Walmart hikes full-year outlook and gets huge tariff refund, but stock falls on sales concerns

Walmart on Thursday posted quarterly sales that beat Wall Street estimates and raised its outlook for the year, as it saw another strong quarter of e-commerce growth and benefited from tariff refunds.

"Our business is strong," CFO John David Rainey told CNBC. "We feel really good about the progress we're making."

The retailer said revenue rose 5.9% in its fiscal second quarter as e-commerce sales jumped 23% globally. Walmart also said U.S. comparable sales grew 2.6%, offset in part by a 0.8% headwind in its health and wellness business as price caps on certain drugs took effect. That was less than the 3.5% increase Wall Street expected, according to FactSet.

Shares of Walmart sank more than 8% in morning trading Thursday, as Wall Street appeared disappointed by the quarterly comparable sales and the company's sales guidance.

For the third quarter, Walmart said it expects net sales to increase between 3% and 3.75% and adjusted earnings per share to be between 62 cents and 64 cents.

The retailer expects net sales to increase between 4% and 5% for the year, compared with a previous outlook of between 3.5% and 4.5% growth. Walmart also anticipates adjusted earnings will be between $2.80 and $2.87 per share, compared with the prior guidance of between $2.75 and $2.85 per share.

Rainey told CNBC the company was eligible to receive roughly $2.9 billion in tariff refunds, and it has yet to get back just under $100 million of that total. Rainey said that Walmart plans to use those funds to lower prices for consumers, and that impact will be seen in the third quarter. 

He added that Walmart also expects to incur just over $2 billion of "incremental cost headwinds related to higher fuel prices this year."

Programming note: Walmart CFO John David Rainey will speak to CNBC's "Squawk on the Street" at 10 a.m. ET. Watch live on CNBC and CNBC+.

Walmart's efforts to lower prices come as many shoppers have cut back on spending as they feel a strain from high fuel and food costs. The company is typically well positioned to weather pullbacks due to its value reputation and its scale as the largest U.S. retailer.

Rainey said Walmart continues to see consumers stretched thin, especially with higher gas prices. It's lowering prices across categories, including beef, he added.

"But consumers are still spending, and real wage growth is keeping pace, and so they've been very resilient in this environment," Rainey told CNBC. "But all that said, we would love to be able to bring prices down more and see less pressure on their wallets."

Here's how the company performed in its fiscal second quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

For the three-month period ended July 31, Walmart reported net income of $6.37 billion, or 80 cents per share, compared with $7.03 billion, or 88 cents per share, in the year-ago period. Excluding the impact of a loss on investments and including a benefit from what it called a tax matter, Walmart reported adjusted earnings per share of 81 cents. The company's gross profit rate grew to 25.4%, boosted by the tariff refund benefit. 

Total revenue climbed to $187.94 billion from $177.40 billion in the year-earlier period. 

The results come as Walmart posts a stretch of solid growth, fueled by gains in segments like pickup and delivery, its third-party marketplace, and advertising. The discounter has gained market share with higher-income customers in recent years as it tries to make shopping more convenient and adds perks to its Walmart+ membership, an Amazon Prime competitor. 

Walmart said companywide membership fee revenue jumped 17%, with net adds for Walmart+ hitting a high for a second quarter. Sam's Club U.S. saw net sales of $25.7 billion for the quarter, up 8.8% from the previous year, as membership fees climbed 6%. 

Meanwhile, Walmart said its global advertising revenue climbed 38%. 

In the U.S., Walmart reported net sales of $125.2 billion compared with $120.9 billion in the year-ago period. ly, the company saw $35.2 billion in net sales, compared with $31.2 billion. It said its global inventory was up 6.7% for the quarter. 

Rainey said a significant portion of that inventory was related to more expensive and elevated brands as Walmart saw the biggest component of its market share gains coming from the high-income consumer.

While its grocery segment saw mid-single-digit percentage point growth, health and wellness saw a low single-digit decline for the quarter. General merchandise revenue was up slightly due to strength in toys and fashion, furniture and private label.