NEW YORK (AP) - Walmart's profit for the first quarter experienced a decline, attributed to increased costs related to tariffs imposed by President Donald Trump. The retail giant, which is the largest in the nation, reported strong quarterly sales and anticipates sales growth of 3.5% to 4.5% in the upcoming second quarter.
Amid a turbulent economic landscape, Walmart refrained from providing a profit outlook for the quarter, citing the ever-changing U.S. tariff policies. Nevertheless, the company upheld its full-year guidance, which was initially issued in February. Consumer spending has seen a reduction, as many Americans express concern over the economy, which is reflected in government data showing slowing sales growth for retailers. Walmart indicated that its customers are exercising caution and selectivity in their spending habits.
The tariffs imposed, particularly those targeting China, threaten Walmart's low-price model, which has been central to its business success. Trump's initial proposal of a 145% import tax on Chinese goods has since been moderated to 30%, with some tariffs being paused for a 90-day period as per a deal announced recently.
In light of the high tariffs, many retailers and importers had temporarily ceased shipments of various goods, including footwear, apparel, and toys. However, with the recent reduction of tariffs, firms are resuming imports from China in hopes of preventing product shortages in the fall. Nonetheless, a consensus among retailers is that price increases are inevitable due to tariff-related costs. Additionally, many are bracing for higher shipping charges, driven by a surge in demand from companies aiming to deliver goods to the U.S.
Walmart has strategically mitigated some tariff risks, as approximately two-thirds of its merchandise is sourced domestically, with groceries constituting around 60% of its U.S. business. Despite these precautions, Walmart is not completely shielded from the impact of tariffs. CEO Doug McMillon articulated that while the company strives to maintain low prices, the significant nature of the tariffs makes it impossible to absorb all costs, especially given the narrow profit margins in retail.
McMillon noted that customers can already expect gradual price increases, which began in April and have intensified into May. Walmart is also focusing on back-to-school items in its preparations. The retail chain imports a wide array of general merchandise from multiple countries, with China being a critical supplier for certain categories, including electronics and toys. Furthermore, tariffs on imports from countries like Costa Rica, Peru, and Colombia have resulted in increased costs for groceries like bananas and avocados.
Walmart’s earnings for the quarter ended on April 30 were recorded at $4.45 billion, representing 56 cents per share, a decline from the previous year's $5.10 billion, or 63 cents per share. Adjusted earnings, however, stood at 61 cents per share, surpassing analyst predictions of 58 cents. Revenue climbed by 2.5% to $165.61 billion, slightly under analyst estimates.
Walmart's U.S. comparable sales—those reflecting established physical stores and online channels—rose by 4.5% in the second quarter, a deceleration compared to a 4.6% increase from the prior quarter and a 5.3% rise in the third quarter of 2024. Following the earnings report, Walmart's shares dropped by 4% during early trading.
The business was particularly buoyed by health and wellness products, alongside groceries, although sales in home goods and sporting items were weaker. This decline was offset by robust sales in toys, automotive products, and children's clothing. Notably, global e-commerce sales surged by 22%, a significant increase from the previous quarter's 16% growth.
Walmart is among the first major U.S. retailers to disclose its financial results, thus providing insights into American consumer sentiment and the impact of tariffs on its operations. In contrast, Amazon recently disclosed higher first-quarter profits and sales, highlighting its continued dominance in the online retail landscape amid the economic uncertainty. The e-commerce giant benefitted from stocking foreign goods prior to the implementation of tariffs, with CEO Andy Jassy noting that many third-party sellers engaged in similar practices.
