Topline

Walmart’s stock on Thursday slid after the retailer reported its slowest U.S. sales growth in years, despite beating Wall Street’s earnings expectations, as its pharmacy business took a hit amid federal negotiations that have cut drug prices.

Key Facts

Shares of Walmart dropped 7.3% to around $105 shortly after trading opened Thursday, pacing the stock’s largest intraday loss since May 21 (7.2%).

Walmart reported $187.9 billion in quarterly revenue and earnings per share of $0.81, exceeding FactSet consensus estimates of $186.6 billion and $0.74, respectively, and the firm raised its full-year guidance for sales and adjusted operating income.

The retailer said U.S. comparable sales grew 2.6% through the quarter, offset by a 0.8% headwind to its pharmacy business as federal negotiations on medications covered by Medicare have lowered drug prices, marking the slowest quarterly sales growth since Q4 2020 (1.9%).

Chief Financial Officer John David Rainey told Bloomberg that drug negotiations impacted Walmart’s business more than expected and the issue will likely persist into next year.

big number

$2.9 billion. That’s how much Walmart is eligible to receive in tariff refunds, though the retailer has received less than $100 million of that total, Rainey told CNBC. Those refunds will be used to lower prices for consumers, likely impacting the next quarter, Rainey said.

key background

Walmart’s earnings often serve as a gauge of overall consumer health, and Rainey reportedly said customers are “still spending” despite higher gas prices. Walmart’s stock hit an all-time high in February, shortly after the firm became the first traditional retailer to surpass the $1 trillion market-cap milestone, as Wall Street analysts praised it as one of the strongest retailers. Shares have declined in recent months, however, as higher inflation has raised concerns about Walmart’s U.S. growth—comparable sales growth in the U.S. has now slowed for the second-straight quarter.