Walmart (WMT -0.18%) is set to announce its fiscal second-quarter operating results on Tuesday, Aug. 18. Investors are looking forward to this report from the retailing giant because it will paint the clearest picture yet on how the industry is adjusting to the COVID-19 pandemic.

Walmart's Q2 spans the months of May, June, and July, so it will capture lingering effects from the shelter-in-place orders, plus the likely slowdown as economies reopened. There are some big questions about how that return to normal will look for Walmart going forward.

Let's dive right in.

Market share check-in

Walmart's 10% sales growth rate in the first quarter translated to a whopping $11 billion of incremental sales added in just the three months ended on May 1. As impressive as that was, some rivals have posted even stronger gains lately. Kroger (KR -0.80%) said in early June that comparable-store sales had spiked 19% through late May. And Dollar General's comps soared 22% in the fiscal first quarter. Costco (COST -0.82%) recently said comps in its core U.S. segment rose 16% for the month of July.

A woman shops for chicken in a grocery store.

Image source: Getty Images.

Investors are expecting more modest gains from Walmart, with sales trends slowing from the first quarter. But the big question is whether the retailer held its own in the market share battle against rivals like Kroger. CFO Brett Biggs said in May that the chain was poised to keep outgrowing the industry, and we'll find out if that was the case as the pandemic progressed through the summer months.

Costs are rising

Most investors who follow the stock are expecting earnings to drop slightly to $1.25 per share this quarter from $1.27 per share a year ago. Walmart is benefiting from surging demand for consumer staples like groceries, but the business is also enduring huge cost spikes.

COVID-19-related expenses amounted to $900 billion last quarter and could be even higher in Q2. At the same time, there are profit margin pressures from the shift away from in-person shopping and toward contactless fulfillment like home delivery. Look for all of these issues to impact operating margin, which last quarter amounted to 3.9% of sales compared to 4% of sales a year earlier.

Still no outlook

Considering the uncertainties around economic growth, unemployment, economic stimulus measures, and the path of the virus, Walmart isn't likely to reinstate any forward-looking guidance on Tuesday. Management will comment on monthly demand trends, though, perhaps even including the start of the fiscal third quarter.

Three months ago, executives sounded an optimistic tone about growth, especially given consumers' enthusiastic usage of its omni-channel selling platform. Walmart paired those encouraging comments with caution on the profit side of the business, which is likely to be strained at least through 2020.

Now the retailing titan will have several more weeks of updated demand figures to review as it looks out toward what will be an unusual holiday shopping season. In projecting short-term trends, management will likely be trying to balance its strong recent sales gains against the potential for tough economic conditions ahead as it guides investors' expectations for the next few quarters.