Walmart disappoints Wall Street in one crucial way

Walmart is the world's biggest brick-and-mortar retailer, and it's quickly challenging Amazon for the e-commerce crown.

The 62-year-old retail chain disrupted the retail store landscape decades ago, drawing criticism for its superstores, which forced mom-and-pop stores out of business with their hard-to-beat prices.

Nowadays, Walmart operates over 10,000 stores worldwide, including about 600 Sam's Club warehouse stores and a fast-growing online marketplace. Those operations haul in hundreds of billions of dollars annually, including $177.4 billion in the second quarter alone.

That's impressive, but not everyone is singing praises over Walmart's second-quarter financials. 

Walmart key statistics:

• 10,750 stores.
• Locations in 19 countries.
• Fiscal year 2025 revenue of $681 billion.
• 2.1 million employees worldwide.

Walmart's second quarter 2025 results:

• Revenue: $177.4 billion, up 4.8%
• Operating income: $7.3 billion, down 8.2%
• Gross profit margin: 24.5%, up slightly from 24.4% one year ago.
• Adjusted earnings per share: 68 cents up one cent year over year.

Walmart has largely penetrated most major markets in the United States with its traditional brick-and-mortar locations. As a result, it has become the go-to place to shop for customers on a budget.

Due to inflation, that's an increasingly larger and diverse customer base. Since Covid, consumer inflation has increased prices by nearly 25%, meaning you'd need to spend $1.25 to buy the item that only cost you $1 in 2020.

Inflation pressure hasn't been Walmart's only tailwind, though. It's also benefited from missteps at one of its major rivals, Target. 

Related: Target visits keep falling in 2025 while Walmart traffic grows

Target has been the subject of controversy and boycotts, including in February and March of 2025, because it decided to roll back DEI programs. Previously, Target also suffered from boycotts related to its decisions regarding its 2023 Pride collection, which drew criticism for including children's clothing.

The combination of cost-conscious shoppers and Target's stumbles helped drive revenue nearly 5% higher in the second quarter. 

"We gained market share in the U.S. and across markets internationally," said Walmart CEO Doug McMillon on the company's earnings conference call.

Walmart also benefited from increasing e-commerce sales, which rose 25% from the second quarter of 2024.

"Walmart U.S. e-commerce profitability continued to increase in Q2 as we make progress on improving net delivery costs and see strong momentum in advertising," said Walmart CFO John David Rainey.

Walmart's comparable sales growth at stores open at least one year was 4.6% in Q2, up from 4.2% one year ago. Transactions rose 1.5%, down from 3.6% last year, while average ticket, or the amount spent per transaction, rose 3.1%, up from 0.6%.

For perspective, Target reported a 1.9% comparable sales decline and an online sales growth of only 4.3% in the quarter.

Walmart's average ticket growth was partly due to inflation and passing along higher costs associated with tariffs, which increased Walmart's import costs.

One-time expenses hurt Walmart's profits.

The top-line revenue figure was $3 billion, better than Wall Street expected; however, one-time adjustments weighed down the company's earnings per share.

The company reported EPS of 68 cents, shy of analysts' 74-cent estimates.

"Adjusted operating income grew 0.4% in constant currency," said McMillon. "This is below what we expected going into the quarter as we absorbed a headwind of 560 basis points for the expenses related to general liability claims in the U.S."

Walmart's guidance for the full fiscal year 2026

• Revenue: Up 3.75% to 4.75%.
• Operating income: Up 3.5% to 5.5%
• Adjusted EPS: $2.52 to $2.62.

The sales guidance was increased from 3% to 4%, which is bullish. However, operating income growth guidance was unchanged, and the company's EPS outlook is shy of the analysts' consensus $2.63 estimate.

Walmart's balance sheet is 'very disappointing'

The company's push into e-commerce is encouraging, and it's beating rival Target regarding sales growth. However, long-time Wall Street analyst Stephen Guilfoyle is unimpressed by the company's finances.

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"Walmart ended the quarter with a cash position of $9.431 billion and inventories of $57.729 billion. That puts current assets at $82.033 billion. Current liabilities add up to $103.566 billion, including $7.848 billion in shorter-term debt," wrote Guilfoyle on TheStreet Pro. "This leaves the firm with a very disappointing current ratio of 0.79, down from 0.82 six months ago."

A current ratio is a liquidity measure based on current assets divided by current liabilities. Retailers typically have lower current ratios than other industries, but generally, analysts like to see companies boast a current ratio above 1.

In Guilfoyle's case, he hoped for an improvement in the ratio, not a deterioration.

"When a firm has just $9.4 billion in cash and has more than $7.8 billion in debt due in less than 12 months, I find it just incredible that the firm would spend $6.2 billion on share repurchases over six months, knowing it had to pay shareholders almost $3.8 billion in cash over that same time frame," wrote Guilfoyle on TheStreet Pro. "They could have bought back fewer shares and reduced that debt load."

Guilfoyle notes that total debt rose by $4.42 billion in the past six months despite Walmart's sales growth and strong cash flows.

"What the actual hockey puck is that? Hello! McFly? Is anybody home? Hey, Rainey, instead of appearing on CNBC, manage your cash flows and improve your balance sheet. Do better," chided Guilfoyle.

As for whether or not Walmart stock is a buy, Guilfoyle didn't pull any punches.

"I'll still shop there. That will be the extent of our relationship," said Guilfoyle.

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