Walmart shares fell close to 7% ahead of Thursday's market open after the retailer's pharmacy unit took a hit from changes to Medicare drug price regulations. Revenue and earnings per share both beat estimates, but comparable sales growth came in below what analysts expected.
Walmart's stock dropped as much as 7% before the opening bell on Thursday, after the retailer reported second-quarter results that fell short on comparable sales even as revenue and profit beat Wall Street estimates. CNBC put the premarket decline at 6%.
Pharmacy pressure drags on comparable sales
The Bentonville, Arkansas-headquartered company said its U.S. comparable sales, excluding fuel, rose 2.6% in the quarter, pressured by its pharmacy business following changes to Medicare drug price regulations. That marks the lowest growth rate since the fourth quarter of fiscal 2020, the three months ended January 31, 2020, when sales grew 1.9%.
CNBC reported the 2.6% comparable-sales figure came in short of the 3.5% increase expected from analysts polled by FactSet. The outlet also said Walmart's earnings guidance for the fiscal third quarter and full year fell short of expectations.
Revenue and profit beat estimates
Despite the sales miss, Walmart reported revenue of $187.9 billion, up nearly 6% from a year earlier and above the $186.7 billion analysts had estimated, according to LSEG data. The retailer, which operates close to 11,000 stores in 19 countries, posted earnings per share of 80 cents for the period ended July 31, down from 88 cents a year earlier but above the consensus estimate of 74 cents.
CEO John Furner said: "Our team delivered another good quarter", according to a statement accompanying the results.
Outlook raised despite the miss
Walmart said its gross profit rate grew by 96 basis points in the quarter, led largely by the impact of tariff refunds in the U.S. For the full year, the company now expects sales to grow between 4% and 5%, up from its previous outlook of 3.5% to 4.5%.
Rival Target reported its own results a day earlier, on Wednesday, raising its full-year sales growth forecast to around 5% after better-than-expected second-quarter results. Target's shares slipped 1.7% in premarket trading as Walmart released its own report.
Sources: MarketWatch.com, CNBC
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