What Went Wrong With Walmart?

Summary

Poonam Goyal attributes Walmart's weak US same-store sales to pharmacy deflation from federal drug-price negotiations and expects the headwind to persist for upcoming quarters. She views the sharp stock drop as a temporary overreaction because Walmart's underlying health remains intact, with e-commerce and advertising as long-term growth drivers. Walmart can also use price investments to attract stretched consumers. The conversation also flags a low-end consumer that is increasingly pressured by high gas and utility costs.

• Walmart's US same-store sales miss was driven largely by pharmacy deflation.
• The pharmacy comp-sales impact rose from 100 bps to 125 bps and may continue.
• Walmart's underlying business health remains intact despite the selloff.
• E-commerce and advertising are expected to drive future exponential growth.
• Walmart can invest in price to draw in more consumer spending.
• The low-end consumer is stretched and shifting toward private label.
• Higher gasoline, oil, and utility costs could further pressure consumers.
• Wealthier consumers are mostly growing through Walmart Plus online.