Walmart Earnings Preview: Can It Defy a Weakening Consumer?

Walmart reports fiscal second-quarter results before the market opens on August 20, with investors expecting another quarter of steady growth from the largest retailer in the United States. This Walmart earnings preview comes as management previously guided to 4%–5% constant-currency net-sales growth, 7%–10% operating-income growth and adjusted EPS of $0.72–$0.74, while Wall Street is looking for roughly $187 billion of revenue.

Those numbers matter, but they are not really where the suspense is.

July U.S. retail sales fell sequentially, real hourly earnings remained under pressure, gasoline prices have moved above $4 nationally, and lower-income consumers are showing increasingly visible signs of budget stress. Normally, that would be a warning for a retailer. Walmart’s problem is more complicated: weakness elsewhere can actually strengthen its competitive position as consumers trade toward value.

The real earnings question is whether Walmart can prove that the consumer slowdown is still somebody else’s problem. And the answer may matter less for this quarter’s EPS than for how investors think about traffic, market share and operating leverage over the next two quarters.

What Wall Street Is Modeling In This Walmart Earnings Preview

The base case going into the print is relatively straightforward. Walmart’s second-quarter sales are expected to grow around the mid-single digits, broadly consistent with management’s 4%–5% constant-currency guidance. The company has also guided operating income to rise faster than revenue, with 7%–10% constant-currency growth implying that the higher-margin parts of the business should begin doing more work.

That expectation is anchored in a strong first quarter. Walmart generated $177.8 billion of revenue, Walmart U.S. comparable sales grew 4.1% excluding fuel, global e-commerce sales advanced 26%, and advertising grew 37% globally. Membership fee revenue also increased more than 17%, while U.S. marketplace sales grew nearly 50%.

The obvious bullish narrative is therefore familiar: Walmart keeps taking share, digital growth remains strong, advertising and membership improve the profit mix, and its enormous store footprint increasingly becomes fulfillment infrastructure rather than just physical retail space.

But the quarter is arriving under a less forgiving consumer backdrop. July retail sales declined 0.6% from June, real hourly earnings fell year over year, and fuel costs are squeezing household budgets and Walmart’s own distribution network. That makes the Walmart earnings preview less about headline growth and more about whether the company can keep absorbing pressure better than the broader retail sector.

The priced-in assumption is not merely that Walmart grows—it is that Walmart keeps growing through consumer stress better than everyone else. That is a much higher bar.

The Metric That Actually Matters: Traffic

EPS can beat by a few cents for dozens of reasons. Traffic is much harder to manufacture.

Walmart U.S. transactions rose about 3% in the first quarter, the company’s strongest traffic performance in six quarters, while average ticket increased only around 1%. That distinction matters because it suggests recent comparable-sales growth has been driven largely by more customers shopping Walmart rather than existing customers simply paying higher prices.

Management has repeatedly said it is gaining share across income cohorts. Higher-income households have been increasingly engaging with Walmart’s broader assortment, faster delivery and marketplace, while lower-income households are leaning into its value proposition as budgets tighten. That combination is strategically powerful because Walmart can win from both sides of the consumer divide.

The pressure is already visible beneath the surface. Management said the average amount of gasoline purchased during a Walmart fuel visit dropped below 10 gallons for the first time since 2022. At Sam’s Club, however, gasoline gallons were rising sharply while industry volumes were falling, suggesting shoppers were actively seeking cheaper alternatives.

For investors reading this Walmart earnings preview, the key issue is whether that migration toward value remains strong enough to offset outright pressure on household spending.

If Q2 traffic remains strong despite weaker consumer conditions, the message would be significant. It would indicate that economic stress is not simply reducing spending—it is redirecting spending toward Walmart.

That matters for valuation because sustained traffic gains feed almost every other part of the model. More traffic increases marketplace activity. Marketplace activity attracts sellers. Sellers buy advertising. Frequent shoppers have more reason to subscribe to Walmart+. Faster delivery raises engagement. Higher engagement creates more monetization opportunities without requiring a proportional increase in inventory or store count.

Traffic is the input; the higher-margin flywheel is the output.

What An Upside Surprise Would Actually Look Like

The cleanest upside scenario is not Walmart dramatically beating EPS expectations. It is Walmart showing that consumer weakness is accelerating share gains without requiring a destructive pricing response.

A strong outcome would likely include healthy transaction growth, another quarter of positive general-merchandise momentum, continued strength among higher-income customers and evidence that Walmart’s roughly 7,200 rollbacks are driving units rather than simply compressing margins.

General merchandise is especially important. Q1 marked the first time in 18 quarters that merchandise mix contributed positively to Walmart U.S. gross margin, with general-merchandise sales growing mid-single digits and share gains reaching their strongest level in five years. Fashion and beauty were standouts.

Management has already cautioned that some Q1 strength may have benefited from tax refunds, so investors should not expect an identical mix benefit in Q2. That makes continued discretionary strength more valuable if it occurs.

The other piece would be operating leverage. Walmart said U.S. e-commerce generated incremental margins of roughly 12% last quarter, while advertising and membership together now account for approximately one-third of operating income. If those businesses remain strong and consolidated operating income grows materially faster than sales, investors would get evidence that Walmart’s transformation is finally beginning to show up more clearly in group profitability.

That is one reason the Walmart earnings preview should focus less on EPS and more on whether higher-margin businesses are beginning to change the economics of the enterprise.

The psychology would shift from “Walmart is defensive” toward “Walmart is structurally taking share while improving its earnings mix.”

That is the scenario that could make a premium multiple look more like a reflection of business-model evolution than a simple safety premium.

Where The Downside Case Gets More Dangerous

The obvious downside is weaker comparable sales. The more important downside would be weaker traffic accompanied by renewed margin pressure.

Walmart can tolerate modest ticket softness if customer counts remain healthy. It becomes more concerning if pressured households begin reducing trips, delaying discretionary purchases or trading down even within Walmart’s assortment. That would challenge the thesis that Walmart remains insulated because of value.

There is also a less obvious risk: Walmart could continue gaining share while still disappointing investors financially.

The company is investing aggressively in price. Management has said that when consumers are under pressure, one of the highest-return uses of capital is to reinforce Walmart’s price leadership. That may be strategically correct over several years, but it can suppress near-term margins.

Fuel is another complication. Walmart absorbed roughly $175 million of higher-than-planned fuel costs in Q1 across global distribution and fulfillment. Management still maintained Q2 operating-income guidance, which effectively raises the burden of proof for this quarter.

And despite strong advertising growth, membership momentum, e-commerce profitability improvements and marketplace expansion, Walmart’s consolidated operating margin remains in the low-4% range.

That is increasingly difficult to ignore.

In this Walmart earnings preview, that disconnect may be the most important hidden risk: the company is generating significantly more revenue from businesses that should carry better economics than traditional grocery retail, yet those benefits have not translated into dramatic consolidated-margin expansion.

If the flywheel keeps spinning but margins barely move, investors may begin questioning how much of the incremental profit is being reinvested simply to defend the core retail proposition.

The Next Two Calls Matter More Than One EPS Print

Tomorrow’s quarter is only one checkpoint in a longer consumer experiment.

Over the next six to twelve months, the most important question is whether Walmart can maintain share gains while gradually converting its newer businesses into visible operating leverage. Advertising, membership, marketplace, fulfillment services and automation are no longer side projects. Management describes them as core components of the future profit model.

Advertising is particularly important because it monetizes traffic Walmart already has. Marketplace expands assortment without requiring Walmart to own every item. Walmart Fulfillment Services creates another revenue stream from third-party sellers. Membership increases frequency and makes fast delivery more valuable. AI-driven inventory positioning and supply-chain automation should lower fulfillment costs over time.

The mechanism is compelling, but investors still need proof at the consolidated level.

There is also a competitive dimension. Grocery remains one of Walmart’s strongest structural advantages. Food represents the majority of its sales and drives frequent visits into stores that increasingly double as last-mile fulfillment hubs. That frequency provides opportunities to sell higher-margin general merchandise, advertisements, marketplace products and memberships.

Higher gasoline prices and weaker real wages could reinforce that advantage if consumers consolidate trips and prioritize value.

But the same conditions can eventually become too severe. A shopper trading from another retailer into Walmart is good for share. A shopper who stops buying discretionary products altogether is not.

That tension is why this Walmart earnings preview ultimately extends beyond one quarter and into the next two earnings calls.

The next two quarters will help reveal where that line sits.

The Bottom Line

Walmart enters Q2 from an unusual position: worsening consumer conditions may strengthen the company competitively even as they weaken the broader retail environment.

That is why tomorrow’s earnings should be interpreted through traffic, share, merchandise mix and operating leverage rather than through EPS alone. A consumer under pressure who switches to Walmart reinforces the company’s value proposition. A higher-income shopper who stays for faster delivery and broader assortment strengthens it further. Advertising, marketplace and membership then monetize that engagement in ways Walmart could not a decade ago.

The unresolved question is whether those advantages can finally produce meaningfully better margins.

At roughly 38.8x NTM normalized earnings, 19.7x NTM EBITDA and 28.6x NTM EBIT, Walmart is not priced like a conventional low-margin retailer. Its valuation already reflects a considerable amount of confidence in durable share gains and a richer future earnings mix. The stock therefore does not merely need evidence that Walmart remains resilient; investors increasingly need evidence that resilience can translate into stronger economics.

For this Walmart earnings preview, that is the final lens: interpretation matters more than the headline print.

Tomorrow’s report will provide the first answer. The more important signal will be whether Walmart can keep taking consumer share while making every incremental dollar of that share more profitable over the quarters ahead.

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