Walmart Set to Weather Inflation Storm with Strong Earnings Expectations
Walmart is set to report its second-quarter earnings on Thursday, July 31. According to consensus estimates, the retail giant's net income per share is expected to rise by 7.4% year over year to $0.73. The revenue estimate stands at $186.32 billion, a 5% increase from the same period last year.
The company has faced bearish forecasts for its comparable-store sales (comp-sales), with several financial firms lowering their estimates due to pressure from regulatory pricing changes in pharmacy and a cautious consumer. Analysts at Bank of America, RBC Capital, Deutsche Bank, and Oppenheimer have all guided lower on comp-sales forecasts.
Higher gasoline prices persisting for the sixth month will be a key area of focus for investors. Consumer analyst John San Marco notes that this trend means consumers will seek out lower prices, which could benefit Walmart, but also warns that they may not make stock-up trips during times of financial stress, potentially leaving the company vulnerable to discount retailers like Dollar Stores.
Walmart has several factors in its favor, including its massive store network and digitally-enabled ecosystem centered on grocery, fulfillment, advertising, and membership. Its low-price strategy and strong store brand assortment, which comprises over 20% of food sales with gross margins 25-30% higher than regular items, are expected to reinforce profitability despite inflation pressures.
Walmart's third-party marketplace offers 420 million items, and the company has estimated Walmart+ membership at 54 million, deepening loyalty and purchase frequency. The retailer's advertising business, Walmart Connect, generates over $8.2 billion annually with operating margins of 70-80%, helping offset lower gross margins.
Despite facing competition from Amazon, Shein, and Temu, Morningstar believes Walmart's scale, data, and supply chain investments provide structural advantages supporting long-term relevance and margin durability.