Last week, Walmart delivered one of its strongest sales quarters in years. But CEO John Furner did not sugarcoat what is coming.
Speaking on the company’s first-quarter fiscal 2027 earnings call on May 21, Furner made it clear that the pressure from higher fuel costs is real and that shoppers, particularly those on tighter budgets, are already feeling the heat.
The message was direct. And for millions of Americans who shop at Walmart (WMT) every week, it matters.
Fuel costs impact Walmart stock
To understand the CEO’s message, you need to know what rising fuel prices mean for a company like Walmart.
- Walmart operates one of the largest supply chains and delivery networks in the world, with over 10,900 store and club locations worldwide.
- Moving products through that network requires enormous amounts of fuel.
- When fuel prices spike, those impact the bottom line.
In the first quarter, Walmart absorbed roughly $175 million in higher-than-planned fuel expenses.
That wiped out about 250 basis points of operating income growth. In plain terms, fuel costs alone erased a meaningful chunk of what would have been stronger profit growth.
CFO John David Rainey was candid about it and stated.
“These are real impacts to cost of goods sold for us and our suppliers, and if the current elevated cost environment persists, we’d expect somewhat higher retail price inflation in Q2 and the second half of the year.”
He then added that if elevated fuel costs persist, shoppers should expect somewhat higher retail price inflation in the second quarter and the back half of the year.
For context, like-for-like inflation at Walmart was just over 1% in the first quarter. Egg deflation alone knocked nearly 100 basis points off that figure. Once egg prices normalize, that cushion disappears.
Walmart warns of slower spending
The signal that stood out most to Furner and Rainey concerned customer behavior at the gas pump.
Rainey pointed to one telling data point: the average number of gallons customers fill up with at Walmart fuel stations has dropped below 10 for the first time since 2022.
That kind of behavior typically means people are spending only what they can afford in the moment, not filling up completely.
“That’s an indication of stress,” Rainey emphasized.
The divide between income groups is widening. High-income customers are still spending with confidence, and lower-income customers are budgeting more carefully and pulling back in visible ways.
Related: Walmart raises the red flag on rising prices
Despite these headwinds, Walmart is gaining market share.
Transaction growth in the United States in the first quarter was the strongest in six quarters. The reason is straightforward: when wallets tighten, more shoppers trade down to Walmart.
Furner leaned into that dynamic. The company now has approximately 7,200 rollbacks active across its assortment, up more than 20% compared to last year.
A recently launched grilling basket, for example, feeds eight people for under $5 per person.
Walmart’s strategy to keep shoppers loyal
Walmart is using its scale and technology to hold customers even as budgets tighten.
AI shopping assistant Sparky has seen weekly active users more than double in just the past quarter. Customers using Sparky spend an average of 35% more per order than those who do not use Sparky.
The company is also leaning on speed, now reaching about 60% of the U.S. population with delivery in 30 minutes or less.
More Walmart:
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Rainey noted that 17% growth in membership fee revenue reflects customers who see real value in staying connected to Walmart, especially for fuel savings benefits right now.
On guidance, Walmart is holding firm. The company reiterated full-year constant-currency sales growth of 3.5% to 4.5% and expects operating income growth of 6% to 8% for the year. For the second quarter, earnings per share guidance was $0.72 to $0.74.
Furner closed on a confident note, calling the business strong and the strategy clear. But the warning embedded in the call was equally clear: fuel prices are a real wildcard, and every American shopping for groceries or filling up a gas tank will feel it.
Related: Walmart CEO sends shoppers troubling message on prices
