Walmart earnings top Street; warns of higher prices from tariffs
Walmart Inc. reported a solid first quarter with better-than-expected earnings and strong sales as well its first profitable quarter for its e-commerce business both in the U.S. and globally.
Similar to some other retailers, the retail giant did not issue a profit outlook for its current quarter amid an uncertain environment marked by fast-changing U.S. tariff policies. Walmart maintained its full-year guidance.
“Given the dynamic nature of the backdrop, and the range of near-term outcomes being exceedingly wide and difficult to predict, we felt it best to hold from providing a specific range of guidance for operating income growth and EPS for the second quarter," stated Walmart CFO John David Rainey. “With a longer view into the full year, we believe we can navigate well and achieve our full year guidance.”
On the company’s earnings call, Walmart CEO Doug McMillon said that the company would do its best to keep its prices on food and consumables “as low as it can.”
“But given the magnitude of the tariffs, even at the reduced levels announced this week, we aren’t able to absorb all the pressure given the reality of narrow retail margins,” he told analysts.
McMillon noted that while all of the tariffs create cost pressure for the company, the larger tariffs on China have the biggest impact.
"The cost pressure from all the tariff impacted markets started in late April, and it accelerated in May," he said. "We won’t let tariff related cost pressure on some general merchandise items put pressure on food prices."
McMillion added that as it relates to food, "tariffs on countries like Costa Rica, Peru and Colombia are pressuring imported items like bananas, avocados, coffee and roses."
“We’ll do our best to control what we can control in order to keep food prices as low as possible,” McMillon said. "An example would be controlling the amount of fresh food waste. In some cases, we’re holding our retails where they are despite the tariff cost pressure."
Walmart 's construction suppliers are shifting materials from tariff impacted components like aluminum to fiberglass, where there is no tariff, McMillon said.
Walmart is the largest importer of container goods in the U.S., which makes it heavily exposed to tariffs. In remarks on the earnings call, Rainey said while the company is “very pleased and appreciative of the progress” that has been made by the administration to bring tariffs down... we still think that's too high.”
First quarter
Walmart’s net income fell to $4.49 billion, or $0.56 per share for the quarter ended April 30, compared with $5.10 billion, or $0.63 per share for the year-ago quarter. Adjusted earnings per share were $0.61, topping analysts’ expectations of $0.58 per share.
Total revenue grew 2.5% to $165.61 billion, below analysts’ estimates of $165.84 billion. E-commerce sales surged 21% in the U.S., the 12th-straight quarter of double-digit gains, and were up 22% globally.
At Walmart U.S., net sales rose 3.2% to $112.2 billion, and comparable sales increased 4.5%. Sales were led by health and wellness and grocery.
Customer transactions at Walmart U.S. stores rose 1.6%. The value of the average ticket increased 2.8%.
At Sam’s Club U.S., net sales increased 2.9% to $22.1 billion. Comparable-store sales rose 6.7%. Transactions increased 4.8%, while the average ticket price rose 1.7%.
"Walmart’s Q1 results demonstrate the company’s structural advantages and best in class operations, which position it well to defend market share longer term," commented David Silverman, senior director, Fitch Ratings. "However, even Walmart is challenged to navigate near term uncertainty around an evolving tariff policy and waning consumer sentiment."
Silverman said that Fitch expects discretionary categories across retail could decline in the mid-single digits in 2025 and Walmart may not be immune from these headwinds.
"The company could benefit from its low-price positioning as it has in recent years, but could also see its core customer base reduce spending or trade down to even lower-priced retailers," he noted. "Overall we expect 2025 to be choppy for retailers, but best-in-class operators like Walmart are better positioned to navigate near term uncertainty and potentially strengthen their competitive position longer term."
