Walmart Plunges 5.01%—What’s Fueling the Retail Giant’s Sudden Slide?

Summary
• Walmart (WMT) slumps 5.01% to $97.43, its worst intraday drop since 2022.
• Q2 earnings miss expectations with adjusted EPS of $0.68 vs. $0.73 forecast.
• Tariff-driven costs and legal charges weigh on operating income, despite $177.4B revenue.
• Sector peers like Target (TGT) also falter, with the retail index under pressure.
Walmart’s sharp decline has sent shockwaves through the retail sector, with investors grappling to parse the implications of its earnings shortfall and tariff-driven cost pressures. The stock’s 5.01% drop—a stark contrast to its 14% year-to-date rally—has sparked urgent questions about the sustainability of its recent momentum and the broader retail landscape.

Earnings Miss and Tariff Headwinds Trigger Sell-Off
Walmart’s 5.01% intraday plunge was catalyzed by a combination of earnings disappointment and escalating tariff-related costs. The company reported adjusted earnings per share of $0.68, falling short of the $0.73 consensus, while operating income declined over 8% due to legal and restructuring charges. CEO Doug McMillon highlighted rising tariff-impacted costs, which are squeezing margins as the company navigates inventory replenishment at post-tariff price levels. Despite robust revenue growth of $177.4B and strong e-commerce performance, the market fixated on near-term margin pressures and the risk of further price hikes in H2 2026.

Retail Sector Volatility Intensifies as Target Trails Walmart’s Slide
The retail sector mirrored Walmart’s downward trajectory, with Target (TGT) falling 2.3% amid its own leadership transition and profit concerns. Sector-wide, tariff uncertainty and shifting consumer spending patterns are amplifying volatility. While Walmart’s e-commerce growth (25% year-over-year) outpaced expectations, rivals like TJX and Home Depot are also recalibrating strategies to mitigate inflationary pressures. The sector’s collective struggle to balance cost discipline with customer value underscores a broader challenge for retailers navigating a high-tariff environment.

Options Playbook: Capitalizing on Volatility with Leverage and Precision
• 200-day average: 94.26 (near support)
• RSI: 67.01 (neutral to overbought)
• MACD: 1.24 (bullish divergence)
• Bollinger Bands: Price at 95.53 (lower band) vs. 105.18 (upper band)
• Key levels: 95.53 (support), 97.14 (resistance), 100.36 (middle band)
Walmart’s technicals suggest a short-term bearish bias amid oversold conditions, with the 200-day average acting as a critical floor. The options chain reveals high-liquidity contracts with attractive leverage ratios and implied volatility. Two standout options for bearish exposure are:

• WMT20250829C96 (Call):
- Strike: $96, Expiry: 2025-08-29
- IV: 25.00% (moderate), Leverage: 39.96%, Delta: 0.669, Theta: -0.312, Gamma: 0.0947
- Payoff at 5% downside (92.56): $0.00 (strike above current price)
- Why it stands out: High leverage and liquidity, ideal for short-term directional bets.

• WMT20250829C97 (Call):
- Strike: $97, Expiry: 2025-08-29
- IV: 22.07% (moderate), Leverage: 58.74%, Delta: 0.576, Theta: -0.278, Gamma: 0.1158
- Payoff at 5% downside (92.56): $0.00 (strike above current price)
- Why it stands out: Strong gamma and theta, offering sensitivity to price swings and time decay.

Action: Aggressive bears may consider shorting WMT20250829C96 into a breakdown below $95.53, while bulls eyeing a rebound should watch for a retest of the 200-day average at $94.26.

Backtest Walmart Stock Performance
The backtest of Walmart (WMT) after a -5% intraday plunge shows favorable short-to-medium-term performance. The 3-day win rate is 60.13%, the 10-day win rate is 66.14%, and the 30-day win rate is 75.95%, indicating a higher probability of positive returns in the immediate aftermath of the plunge. The maximum return during the backtest period was 7.50%, which occurred on day 59, suggesting that WMT can bounce back strongly from such events.

Retail’s Tariff-Driven Crossroads: What’s Next for Walmart?
Walmart’s 5.01% drop reflects a market grappling with near-term margin pressures and tariff uncertainty, but its long-term fundamentals remain intact. The stock’s 33.76 P/E and 8.3% ROA suggest resilience, while its raised full-year guidance hints at disciplined execution. Investors should monitor the 95.53 support level and the sector’s reaction to Target’s leadership shift (-2.3% intraday). For now, the path of least resistance appears bearish, but a rebound above $100.36 could reignite optimism. Watch for $95.53 breakdown or regulatory reaction.