Key Points

Walmart has advanced in drawing higher income shoppers yet many of its customers remain sensitive to climbing fuel costs.
The company CFO recently informed investors that Walmart customers are purchasing under 10 gallons of gas per visit.
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Elevated fuel prices tied to the Iran conflict have created strain across the global economy. Few enjoy paying more at the pump. Higher gasoline and diesel costs lift expenses for all by increasing outlays on inventory supplies delivery and freight. Still these prices weigh most heavily on lower income households.

The world's largest retailer Walmart (NASDAQ: WMT) may face particular exposure to rising fuel prices. Its customer base often consists of lower income households. When more of their earnings go to fuel tanks discretionary spending can shrink.

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According to Bloomberg Walmart CEO John Furner said Wednesday that fuel prices are becoming the stress point for U.S. households. Walmart shares have gained about 5% year to date underperforming the S&P 500 index.

Let's see if this retail stock is worth buying or if investors should steer clear.

Image source: Getty Images.

Walmart customers are buying less than 10 gallons of gas at a time

During the company's most recent quarterly earnings call on May 21 Walmart Chief Financial Officer John David Rainey said that while Walmart's higher income customers are spending with confidence the lower income customers are more budget conscious and perhaps navigating financial distress.

Rainey also said that the number of gallons that customers fill up with when they come to our fuel stations fell below 10 for the first time since 2022. This is a sobering stat. It goes to show just how hard some Walmart shoppers are getting hurt by high gas prices they are trying to ration their own gasoline.

Why Walmart shares have been down since May 21

Walmart stock has declined by about 11% since the company reported earnings on May 21. According to CNBC the sell off happened because Walmart's guidance for the rest of its fiscal year 2027 was underwhelming to investors.

The company said on May 21 that it expects net sales to increase 3.5% to 4.5% for the year with expected adjusted earnings per share (EPS) of $2.75 to $2.85 lower than expectations of $2.91. Walmart shares are trading at a trailing 12 month price to earnings (P/E) ratio of 41.16 which suggests the company is richly valued. Even the Invesco QQQ Trust (NASDAQ: QQQ) which tracks the tech heavy Nasdaq 100 index has a lower P/E ratio (36.30).

If Walmart's earnings multiple is higher than that of some major tech stocks and its expected earnings are disappointing analysts that is a bad combination. I have previously written that Walmart was trading like a tech stock. But that was in February right before the Iran war started and gas prices spiked.

This company has made valuable efforts to expand into e commerce and gain market share with higher income customers. But if gas prices stay high for the rest of 2026 Walmart might be more vulnerable to a sales slowdown than most major retailers.

Based on today's high valuation and the lingering uncertainty about gas prices I would not rate Walmart stock as a buy unless you are a patient investor and ready to hold the stock for five years or more.

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Ben Gran has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq Inc.