Morning Note: Market news and results from Walmart.

Market News

Traders avoided major moves ahead of Fed Chair Powell’s remarks at Jackson Hole, which may offer signals on the US policy outlook. On Thursday, Fed officials gave little indication of support for a rate cut next month, leaving markets focused on Powell’s speech for guidance amid signs of a cooling labour market. Wagers on an imminent interest-rate cut have been reduced.

The yield on the 10-year US Treasury note held above 4.32%, while gold trades at $3,327 an ounce. Brent Crude trades at $67.50 a barrel, on track for their first weekly gain in three, as hopes for a swift US-brokered deal to end the Russia-Ukraine war faded.

US equities fell last night – S&P 500 (-0.4%); Nasdaq (-0.3%) – with most of the Mag 7 trading lower. Nvidia told suppliers Samsung and Amkor to stop production related to its H20 AI chip after Beijing urged local firms to avoid using it, The Information reported. CEO Jensen Huang reaffirmed the chip has no security backdoors.

In Asia this morning, Chinese equities stood out (Shanghai Composite, +1.5%) as tech stocks rose on the Nvidia report. Elsewhere, other markets in Asia also rose: Nikkei 225 (+0.1%); Hang Seng (+0.9%). Japan’s core inflation slowed for a second straight month in July – 3.1% for core CPI – but stayed above the central bank’s 2% target, keeping alive market expectations for another interest rate hike in the coming months.

The FTSE 100 is currently 0.2% lower at 9,293, while Sterling trades at $1.3410 and €1.1565. Britons are feeling more optimistic about their finances, with GfK’s index rising to 5 in August, the highest in a year. But lower-income households are still struggling with inflation and rising food prices.

Source: Bloomberg

Company News

Yesterday lunchtime, Walmart released results for the three months to 31 July 2025, the second quarter of its financial year to 31 January 2026. Although the group generated good growth in revenue in each business segment, earnings came in below market expectations. Full-year revenue guidance was upped, while the outlook for earnings remains the same. In response, the shares were marked down by 4%.

Walmart operates more than 10,750 stores and numerous e-ecommerce websites under 46 banners in 19 countries. In the face of strong competition, the group’s strategy is ‘to lead on price, invest to differentiate on access, be competitive on assortment, and deliver a great experience’. This means the company can often weather economic storms better than others. As the largest importer of container goods in the US, Walmart is heavily exposed to tariffs and has been raising prices in response.

During the three months to the end of July, total revenue increased by 5.6% on a constant currency (CC) basis to $177.4bn, a touch above the market expectation of $176bn.

In the US, comparable sales increased by 4.6% (ex-fuel) to $120.9bn, with strong growth in grocery and health & wellness. Growth was made up of a 1.5% increase in transactions (i.e., volume) and 3.1% rise in average ticket (i.e., price). E-Commerce sales grew 26%, led by store-fulfilled pick-up & delivery and marketplace. Sam’s Club, the trade business, generated revenue of $21.2bn, up 5.9% in comparable terms (ex-fuel).

Outside of the US, the international business grew by 10.5% at CC to $32.7bn. Global eCommerce sales were up 25%, while the Advertising business grew by 46%. Membership and other income was up 5.4%, including 15.3% growth in membership income globally.

Group gross margin rose by four basis points in the year to 24.5%, led by the US. The group kept a tight rein on costs and adjusted operating income rose by 0.4% at CC to $8.0bn. Adjusted EPS was up 1.5% to 68c, below the market expectation of 74c.

The group generated free cash flow of $6.9bn to leave net debt at $40.9bn. Global inventory was up 3.8% to $57.7bn and the company highlighted that in-stock levels are ‘healthy’. Excess cash is returned to shareholders through dividends and buybacks. During the year to date, the group has bought back $6.2bn of its shares, leaving $5.9bn of its $20bn repurchase authorisation. In the last financial year, the dividend was increased by 13% to $0.94, the largest increase in over a decade, equating to a yield of 1%.

The company has issued guidance for the current quarter: net sales are expected to increase by 3.75% to 4.75% and operating income by 3%-6%, both in constant currency.

Guidance consolidated net sales growth for financial year to January 2026 has been raised to 3.75%-4.75% at constant currency (vs. 3.0%-4.0% previously). However, operating income growth is still expected to be 3.5%-5.5%, including a headwind of 150 basis points from the acquisition of VIZIO and lapping leap year. Adjusted EPS is expected to come in at $2.52-$2.62.

Source: Bloomberg