Walmart Beats Earnings, Stock Drops 7% — Wall Street's Most Confused Holiday

BENTONVILLE, Ark. — Walmart, the world’s largest retailer, reported second-quarter earnings on Wednesday that beat analyst expectations on both revenue and profit — and the stock fell 7.3%. Which means that in the current market, beating expectations is apparently the worst thing a company can do.

The numbers were, by any normal standard, exceptional. EPS came in at $0.81 versus a consensus estimate of $0.74. Revenue hit $187.9 billion, topping the $186.75 billion Wall Street had predicted. That’s $1.15 billion more in revenue than analysts expected — roughly the GDP of Tonga, give or take a few coconut imports. The stock, in response, fell to $105.95, which is the investment equivalent of getting a standing ovation and being booed offstage.

The culprit, according to everyone who bought the dip and everyone who sold the dip and everyone who is currently staring at their phone wondering why they work in finance, was the guidance. Walmart raised its full-year outlook, but not by enough. The company now expects comparable sales growth of 3.5% to 4.5%, up from its prior 3% to 4% range — a bump that Wall Street interpreted as evidence that the retail giant is “losing momentum,” which is the kind of thing you say when you have too much money and not enough problems.

A senior analyst at Goldman Sachs, speaking on condition of anonymity because they were not authorized to discuss the finer points of financial disappointment, said the stock decline was “a textbook case of buy the rumor, sell the news.” The analyst then clarified that the “rumor” in question was “Walmart being a functional company that sells things people need,” and that the “news” was “Walmart being a functional company that sells things people need, but slightly better than expected, which is apparently unacceptable.”

The broader market context made the Walmart drop feel even more absurd. The S&P 500 had already fallen 0.9% on Wednesday, its third consecutive day of losses, driven by “elevated global bond yields and oil prices” — which is financial-speak for “everything is expensive and everyone is worried about it.” In this environment, Walmart’s earnings beat was supposed to be a bright spot. Instead, it became a cautionary tale about the perils of being too good at your job.

Walmart CEO Doug McMillon addressed the stock decline in a call with analysts, describing the company’s performance as “strong” and “resilient” and noting that “when you serve 230 million customers a week, a little volatility in the stock price doesn’t change the fundamental value proposition.” This was interpreted by the market as a sign that McMillon is “not taking the stock decline seriously enough,” which is the kind of feedback you get when the stock falls 7% and your CEO has the audacity to point out that the company made $4.5 billion in profit last quarter.

The Walmart earnings report also offered a window into the American consumer, who apparently cannot make up their mind. Traffic at Walmart stores was down slightly, but basket sizes were up — meaning fewer people are going to Walmart, but the ones who go are buying more. In economic terms, this is known as “a paradox,” and in human terms, it is known as “people are tired of shopping but still need toilet paper.”

At press time, Walmart stock had recovered approximately 0.4% in after-hours trading, which financial analysts described as “a start” and “the market’s way of saying sorry for overreacting,” and which everyone else described as “noise.”