Walmart Faces Same-Store Sales Slowdown and Tariff Uncertainty

What happened

Cleveland Research published a note stating that its channel checks revealed a slowdown in Walmart's same-store sales. The analyst indicated that Walmart may be lowering prices to clear excess inventory, potentially offsetting these reductions with tariff refunds from the government. Following the Supreme Court's decision earlier this year to strike down most tariffs imposed in early 2025, companies including Walmart became entitled to refunds, with Customs and Border Protection accepting applications starting April 20. The analyst questioned whether Walmart will be able to beat its sales guidance for the quarter ending in late July, contributing to a 4.5% stock decline on Wednesday. This pullback extended a broader decline, with shares down nearly 20% from their May highs.

Why it matters

The slowdown in same-store sales raises questions about Walmart's near-term performance during a critical quarter. If the company is indeed lowering prices to move excess inventory, this could pressure profit margins even if partially offset by tariff refunds. The uncertainty is compounded by the potential introduction of new, possibly higher tariffs under a different statute beginning July 24, along with elevated oil prices in the second quarter. These factors create a dual challenge of lower consumer demand and higher operational costs. Even though Walmart's significant buying power positions it better than most big-box retailers, the company cannot entirely escape these macroeconomic headwinds. Additionally, Walmart's current valuation of 38 times earnings against guided revenue growth of around 4% leaves little margin of safety for any operational missteps or external shocks.

Bigger picture

The broader retail sector faces a complex environment shaped by tariff policy uncertainty and macroeconomic pressures. The Supreme Court's decision to strike down the Trump Administration's early 2025 tariffs provided temporary relief, but the expectation of new tariffs later in July creates ongoing uncertainty for retailers' cost structures and pricing strategies. Higher oil prices, partly driven by geopolitical tensions, are squeezing consumers and increasing the cost of goods due to elevated transportation expenses. This challenging backdrop affects all major retailers, though those with strong buying power and scale like Walmart are relatively better positioned. The combination of potential new tariffs, higher energy costs, and cautious consumer spending suggests continued pressure across the retail industry.

What to watch

Investors should monitor Walmart's quarterly results for the period ending in late July to see whether the company meets, beats, or misses its sales guidance. Key metrics include same-store sales growth, inventory levels, and gross margin performance, which will reveal how effectively Walmart managed pricing and inventory clearance. Watch for any commentary on tariff refunds received and their impact on profitability. Additionally, developments around new tariffs potentially taking effect on July 24 will be critical, along with any guidance on how Walmart plans to manage these costs. Consumer spending trends, particularly in staples and discretionary categories, and oil price movements will also provide important context for Walmart's performance in the coming quarters.