Why Walmart Stock Sank Today

Key Points

• Walmart reported its Q2 earnings, showing tariffs are impacting its bottom line.

• Sales were up, however, including same-store sales, a critical measure.

• 10 stocks we like better than Walmart ›

Shares of Walmart (NYSE: WMT) fell 4.9% Thursday. The drop came as the S&P 500 lost 0.5% and the Nasdaq Composite lost 0.4% as investors await Federal Reserve Chair Jerome Powell's speech tomorrow.

The retail giant reported its second-quarter earnings, which were somewhat mixed. The company delivered solid sales growth but missed on earnings.

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Walmart expects tariffs to continue to impact earnings

Walmart's revenue exceeded expectations at $177.4 billion, but earnings per share (EPS) were $0.68, well below the $0.74 per share consensus. The company cited tariffs as the primary challenge, as well as some legal charges and restructuring costs.

Still, tariffs and discounts are cutting into its margins from either end. It expects this to continue. CFO John David Rainey said the company was doing its best to take on the rising prices rather than passing them to the consumer, saying, "There are certainly areas where we have fully absorbed the impact of higher tariff costs. There are other areas where we've had to pass some of those costs along."

Image source: Getty Images.

Same-store sales were up

The top-line growth was a welcome sight for investors despite the margin and earnings impact. The key metric of comparable sales for Walmart in the U.S. ticked up 4.6% year over year, meaning overall sales growth is largely organic and not just driven by opening new stores.

While some investors were spooked, I think Walmart remains a cash-flow powerhouse and consumer staple. This is a solid addition to any portfolio.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.