Walmart posted its slowest U.S. sales growth in more than six years Thursday as executives pointed to higher gas prices following the Iran war as one factor causing Americans to tighten their wallets.
Comparable sales at Walmart’s U.S. stores rose just 2.6% in the latest quarter, while the retailer’s stock plunged more than 9% Thursday, its steepest one-day decline since 2022. The results offered a fresh sign that higher fuel costs and broader economic uncertainty were beginning to weigh on consumers, even as Walmart benefited from shoppers seeking lower prices.
Walmart executives said they began seeing a change in shopping behavior after the national average price of gasoline surpassed $4 per gallon in July. The gas prices climbed sharply following the beginning of the Iran conflict, with the national average price reaching $4.09 per gallon on July 23, according to AAA data.
John David Rainey, Walmart’s chief financial officer, said consumers were making different choices as higher fuel costs put additional pressure on household budgets during the company’s earnings call.
“Perhaps there’s a psychological impact to that,” Rainey said on a conference call with investors and analysts. “There are choices that consumers are making.”
The slowdown came after a period in which Walmart benefited from consumers looking for deals amid an uncertain economy. The company continued cutting prices, temporarily lowering the prices of 11,000 items in the U.S. during the latest quarter, up from 7,200 the previous quarter.
Walmart said lower drug prices resulting from regulatory changes also weighed on U.S. sales, but the company nevertheless raised its outlook for full-year sales and profit.
Other major retailers also warned that consumers were becoming more cautious. Lowe’s CEO Marvin Ellison said high interest rates, inflation and gas prices had weighed on the retailer’s middle-income customer base, while Home Depot said there was still no sign of a meaningful turnaround in big-ticket home improvement spending.
“It’s a combination of fuel prices, geopolitical events and other uncertain things,” Ellison said during Lowe’s earning call. “People are just being cautious with their discretionary spend.”
U.S. retail sales fell 0.6% in July from the prior month, according to Census Bureau data, marking the first monthly decline in nine months and the largest decline in 14 months.
TJX, the parent company of TJ Maxx and Marshalls, reported 4% comparable-sales growth in its latest quarter and said it was seeing higher customer traffic as consumers continued seek cheaper goods.
Walmart used refunds from President Donald Trump’s “liberation day” tariffs struck down by the Supreme Court to help fund price cuts, while Target said it had lowered prices on roughly 10,000 items over the past year.
The state of household finances remained relatively healthy in the aggregate, but low savings rates and rising delinquencies on credit cards, auto loans and student debt were concerning, according to The New York Times.
(DCNF)