Walmart hikes full-year outlook, says it will use huge tariff refund to keep prices low

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 roughly 6% in premarket trading Thursday.

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 not yet gotten back less than $100 million of that total. Rainey said the company 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.”

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.”