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Walmart has warned customers to expect higher prices despite this week’s deal between the US and China to slash punitive tariffs.
The world’s biggest retailer is particularly exposed to US President Donald Trump’s trade war, with China and Mexico its largest source of imports. Goods sourced from overseas make up a third of the merchandise it sells in the US.
Washington and Beijing agreed this week to a cut in tariffs for 90 days, with the US temporarily slashing levies on Chinese imports to about 40 per cent, from as high as 145 per cent.
Doug McMillon, Walmart’s chief executive, said the reprieve was not big enough to ward off future price rises.
“We will do our best to keep our prices as low as possible 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 said in prepared remarks.
The first quarter of the year spanned a volatile time for the US economy, as Trump swiftly imposed and changed tariffs on its trading partners. The 145 per cent levy on China took effect on April 9.
McMillon was among the retail bosses to argue against tariffs at the White House, warning Trump of higher prices and empty store shelves.
The warning from McMillon on Thursday came as Walmart reported a 4.5 per cent annual increase in comparable sales at its namesake US business in the first quarter, surpassing the 3.7 per cent rise forecast by Wall Street analysts, according to a Visible Alpha poll.
The retailer maintained its financial guidance for the full year, which includes a projection of 3 to 4 per cent growth in net sales. However, it withheld guidance on profits in the second quarter, citing the uncertain trade picture. Shares rose 2.14 per cent pre-market.
Walmart is the first big-box retailer to report earnings since Trump’s April tariff announcements. Target and Home Depot will follow next week.
Amazon this month warned tariff and trade policies posed risks to earnings, but the company did not report any slackening of demand or any significant rise in average selling prices on its platform.
Walmart reported that its ecommerce business — which includes sales from its own inventory and from third-party merchants using its platform — was profitable in both the US and globally for the first time. Ecommerce sales rose 22 per cent year on year in the quarter.
Trade war jitters prompted shoppers to speed up purchases of some items in an attempt to beat the tariffs, potentially distorting the picture of consumer demand.
Walmart reported quarterly revenue of $165.6bn, up 2.5 per cent year on year and slightly below forecasts of $166bn, according to Visible Alpha. Net income fell 12.6 per cent to $4.6bn, marginally more than the consensus.
