Why Walmart Stock Dropped 12% in May

Retail giant Walmart (NASDAQ: WMT) stock fell 12% in May, according to data provided by S&P Global Market Intelligence. Although it released a strong earnings report, it also warned that pressure might be coming.

Looking to Walmart for value

Walmart has the largest network of physical stores in the world, with more than 10,000 global locations. It's also a discount retailer, so it plays an even more important role when shoppers are feeling the pinch of inflation. That's been going on for a while, and Walmart has been outperforming over the past few years.

It demonstrated robust results in the fiscal 2027 first quarter (ended April 30), with a 7.3% year-over-year increase in revenue and 4.1% increase in U.S. comparable sales. Operating income was up 5% over last year, and earnings per share rose from $0.61 to $0.66.

Image source: Walmart.

It continues to take market share in e-commerce, which was up 26% year over year, an acceleration. U.S. deliveries were up 45%, and 36% of store-fulfilled orders were delivered within three hours. The company's vast store network gives it an edge, since it uses them for fulfillment. It has an unmatched 5,200 U.S. stores, and there's a location within 10 miles of 90% of the U.S. population.

In India, its Flipkart business has 800 "micro" fulfillment centers that can deliver in as little as 13 minutes, and in the China business, 75% of orders were delivered within one hour.

Feeling some pressure

CEO John Furner said, "When I look at the consumer, especially here in the US, they're telling us, they're feeling some pressure, and they're looking to Walmart for value."

The market zeroed in on the second half of that statement. The company made several references to the consumer feeling stress, specifically the lower-income consumer, who is the U.S. business's core shopper.

CFO John Rainey noted that there's been pressure related to increased oil prices. The average amount of gallons of fuel customers filled their cars with went below 10 for the first time in four years, and he warned that if these prices persist, there's likely to be "upward pressure on average unit retail prices."

Walmart stock quickly dropped from being a market-beating stock this year to falling way behind, and other major retail stocks, including Costco Wholesale and Target, tumbled along with it.

Investors will only find out in the next quarterly update how much this is impacting Walmart's total business. But Walmart is a solid Dividend King (which means it's raised its dividend for at least 50 years straight) that can handle short-term pressure, and long-term investors shouldn't worry right now.

Jennifer Saibil has positions in Walmart. The Motley Fool has positions in and recommends Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy.