Walmart reported another strong quarter on Thursday, driven by robust sales in the United States, but issued a warning that consumers could face higher prices due to the impact of President Donald Trump’s tariffs on China and other major trading partners.
Chief Executive Doug McMillon addressed analysts during a conference call, explaining that while Walmart would strive to keep prices as low as possible, the scale of the tariffs left the company unable to absorb all the costs. “Given the magnitude of the tariffs, even at the reduced levels, we aren’t able to absorb all the pressure,” McMillon said.
The retail giant acknowledged the recent easing of the US-China trade tensions, but emphasized that tariffs on Chinese goods remained too high, particularly impacting products such as electronics and toys. Chief Financial Officer John David Rainey warned that consumers could start seeing price increases later in May, with the most noticeable impact expected in June. He noted that a 30% tariff on certain items could result in double-digit price hikes.
Walmart officials clarified that the extent of the price increases would depend on the specific product. Some products could see higher prices, while others may remain stable or even lower, thanks to Walmart’s scale and strategic pricing. Rainey explained that Walmart might absorb some of the tariff costs to maintain lower prices on select items, thus positioning itself to capture more market share.
“We could see higher prices on some non-tariffed items and stable or even lower prices on some tariffed products,” said Arun Sundaram, senior equity analyst at CFRA Research.
Walmart’s profit for the quarter was $4.5 billion, a 12.1% decrease from the same period last year, but still above analyst expectations. Revenue rose 2.5% to $165.6 billion. The company reported a 4.5% increase in first-quarter comparable sales in its US stores, bolstered by strong grocery sales.
McMillon pointed out that Walmart’s size and buying power allow it to absorb some of the tariff-related costs without passing them on to consumers. In certain cases, suppliers have opted for materials with lower tariffs, such as fiberglass instead of aluminum. However, the company also faces tariff pressures on products imported from countries like Costa Rica, Peru, and Colombia, including bananas, avocados, coffee, and roses.
“We’ll do our best to control what we can control to keep food prices as low as possible,” McMillon said.
Despite the challenges, Walmart has maintained its full-year projections but refrained from offering specific guidance for the second quarter, citing ongoing uncertainty surrounding US trade policy. Neil Saunders, managing director of GlobalData, noted that while Walmart is better positioned than many retailers due to its strong grocery business, the retail giant is not immune to the disruptions caused by tariffs.
“Although the waves caused by tariffs now seem to be calmer, it would be incorrect to assume that the waters are completely safe,” Saunders said. “There will be a lot of further disruption ahead, but Walmart remains one of the sturdiest ships in retail.”
Initially, Walmart’s earnings report prompted a rise in its shares. However, the stock later fell as the company warned of higher prices and refrained from raising its full-year outlook, leaving investors uncertain about the future impact of tariffs.
CFRA analyst Sundaram noted that Walmart’s decision not to provide a range for second-quarter profit guidance contributed to the stock’s decline. “While we still believe the company can exceed its full-year operating profit and earnings forecasts, we now expect more earnings volatility over the next few quarters compared to our initial projections,” Sundaram said.
