Editor’s Note: In previous posts, I have made no secret of my disdain for shopping. I don’t like going into stores and once I am in one, I want to get out as fast as I can.

I realize that puts me in a small minority in this country, where shopping is a national pastime. On a per capita basis, we outspend the rest of the world by a wide margin.

Although I don’t like to shop, I do pay close attention to trends in consumer spending since that is the engine that drives our economy. The day my wife tells me she doesn’t feel like shopping will be the day I sell all my stocks!

Mixed Results

One retail stock that a lot of people sold last week is Walmart (NYSE: WMT) after the company released its fiscal 2026 Q2 results (Walmart’s fiscal year ends on January 31 to account for holiday gifts purchased in the fall that are returned in January).

Most of those numbers were pretty good, including a 4.8 percent increase in total revenue and a 25 percent rise in global eCommerce sales. Also, global membership fees rose by 15.3 percent.

However, those impressive results did not translate into meaningful higher profits. On an adjusted basis, Walmart’s earnings per share (EPS) increased 1.5 percent on a year-over-year (YoY) basis.

The modest rise in EPS is the number that got Wall Street’s attention. Walmart is valued at 37 times forward earnings compared to a multiple of 24 for the S&P 500 Index.

To justify a higher multiple to EPS, a company must be able to increase earnings a faster rate than the average business. If it can’t, then its multiple should be less than that of the index.

That explains why Walmart’s share price fell more than 5 percent the day after its Q2 results became public (circled area in the chart below). It is also why an options trade I recommended to my PF Pro readers gained 152 percent in only ten days.

Ripe for a Pullback

On August 12, I issued a trade alert that recommended buying a put option on Walmart. A put option increases in value when the price of the underlying security goes down.

I noted at that time: “Walmart is up 10 percent over the past month and has gained 53 percent during the past year. At this morning’s opening share price near $104, WMT is valued at 44 times trailing earnings and roughly 40 times forward earnings.”

I further opined, “Those are reasonable multiples for a high-tech growth stock, but my PF Pro stock screener believes they are too high for a business that may be on the verge of a slowdown in consumer spending.” In short, I felt Walmart was overvalued and ripe for a pullback.

I also noted that Walmart chose not to provide guidance when it released its Q1 results three months ago. The company “felt it best to hold from providing a specific range of guidance for operating income growth and EPS for the second quarter” due to “the dynamic nature of the backdrop, and the range of near-term outcomes being exceedingly wide and difficult to predict.”

Green Light Special

That last statement was the green light I needed to feel comfortable betting on a poor result for Walmart’s EPS during the second quarter. That day while WMT was trading around $104, I suggested buying the put option that expires on August 22 at the $99 strike price which could be purchased for less than $1 per share.

I chose that expiration date because Walmart was scheduled to release its Q2 results on August 21, one day before this option would expire. That morning, the company reported a smaller increase in adjusted earnings per share due in part to the effect recently imposed import tariffs had on its profit margin.

That day, WMT traded below $97 which means our put option had over $2 of intrinsic value, more than double our limit price to purchase it. Not every option trade I issue has such a short timeline, but I felt confident Wall Street was underestimating the impact tariffs are having on retailers and I was willing to gamble on it.

In this case, everything went exactly as I expected. And as long as Wall Street continues to ignore the threat of import tariffs on retailers’ profit margins, we should be able to repeat this type of trade in the months to come with similar results.