How Walmart Is Adapting to Inflation

Walmart latest numbers are showing a shift in how Americans shop, and how the world’s biggest retailer actually makes its money.

They reported a 2.6% rise in U.S. comparable sales for the quarter ending July 31.That is its smallest sales gain in over six years, falling short of Wall Street's expected 3.8%. Stock went down 9% to $104, Let’s look closer and see what has happened.

The Shift to Digital Side 

Traditional foot traffic in physical stores saw in-store sales drop, however digital channels went past expectations with a 24% rise in U.S. e-commerce sales.

Walmart's physical stores are transforming into local logistics hubs. Around 80% of online orders are fulfilled directly from nearby stores, including curbside pickup orders and these sales get categorized as e-commerce rather than traditional store sales, hence wrong interpretation of numbers.

The Big Picture 

New federal policies capped mandatory maximum prices for certain high-cost prescription drugs dispensed under Medicare.

Because Walmart operates thousands of in-store pharmacies, these lower drug prices caused deflation in their prescription revenue. Even though people filled more prescriptions during the quarter, the required price drops meant Walmart collected less revenue per sale.

That regulatory change cut about 0.8% off Walmart's U.S. sales growth, but it was driven by government price controls rather than a drop in customer demand.

But despite that Walmart is doing fine financially

Net sales rose 5.9% to $186.1 billion. Thanks to growing advertising business and membership programs, it drove profitability enough for executive leadership to raise full-year sales growth guidance to 4%–5%.

Instead of just waiting out higher prices, Walmart is turning its giant supercenters into local delivery hubs. 

About 90% of the U.S. population lives within 10 miles of a Walmart. Instead of spending billions building giant regional warehouses miles away from cities, Walmart is using its existing 4,600+ physical stores as mini fulfillment centers.

When someone orders online for fast delivery, a worker hands items off to a local delivery driver. Around 80% of Walmart's online orders are processed right out of a nearby retail store rather than a distant warehouse.

Shipping from a store 5 minutes away allows Walmart to offer same day or 30 minute delivery without relying on air travel or long-haul shipping.

It costs far less to ship an item a few miles from a local store than to ship it across several state lines.

Walmart’s recent earnings report highlights a dual narrative: shrinking physical sales and prescription drug price caps capping top-line growth, paired with booming 24% e-commerce growth and high-margin advertising expansion. With WMT stock pulling back ~9% to $104, derivative traders face a prime market setup.

For You

Go Long if WMT holds support around the 100 - 104 zone, to capture upside momentum toward the previous high. Key drivers - raised full year sales guidance (4%–5%), local fulfillment cost efficiencies, and high-margin retail media revenue.