Shares of Walmart, the retail giant based in Bentonville, Arkansas, saw a modest increase of 0.5% in pre-market trading. Over the past year, Walmart's stock has surged by more than 60%, indicating strong investor confidence despite recent market challenges. The company recently announced its decision to withhold second-quarter profit guidance, citing the unpredictable nature of tariffs imposed by the Trump administration that have significantly impacted global trade.
In a recent interview with CNBC, Walmart's Chief Financial Officer, John David Rainey, warned that U.S. shoppers could start to see price increases by the end of May, with more substantial hikes expected in June. "We will do our best to keep our prices as low as possible," Rainey stated, but acknowledged the challenges posed by the magnitude of the tariffs. CEO Doug McMillon echoed these sentiments, emphasizing that the company cannot absorb all the cost pressure due to the narrow retail margins.
Market analysts suggest that Walmart can leverage its relationships with suppliers and improve operational efficiencies to mitigate the impact of tariffs on consumers. However, they caution that this strategy has its limits. Brian Jacobsen, Chief Economist at Annex Wealth Management, noted, "There will likely be some demand destruction from tariffs, but a complete wreck is unlikely." Telsey Advisory Group analyst Joseph Feldman remarked that Walmart's extensive product range gives it flexibility in spreading price hikes, making them more acceptable to consumers. "My sense is Walmart will manage tariffs better than almost every other retailer," Feldman added, indicating that the company is likely to continue generating solid profits.
In its recent financial report, Walmart upheld its annual sales and profit forecasts for fiscal year 2026. The company expects adjusted earnings per share to fall within the range of $2.50 to $2.60 and anticipates annual sales growth of 3% to 4%. Jacobsen found it encouraging that Walmart withheld its second-quarter profit guidance without altering its full-year projections, suggesting confidence in managing the ongoing tariff fluctuations.
The broader economic landscape shows signs of strain, with many U.S. businesses adjusting their full-year expectations due to the ongoing trade war. Consumer sentiment in the U.S. has declined for four consecutive months, indicating cautious spending habits. Furthermore, the country’s GDP contracted for the first time in three years during the first quarter, raising concerns about a potential recession.
Walmart, often seen as a bellwether for U.S. consumer health, reported an impressive 4.5% growth in same-store sales for the first quarter, driven by increases in both customer transactions and unit volumes. The retailer noted a 1.6% rise in transactions and a 2.8% increase in average spending, with consumers gravitating towards dairy, pantry products, fresh food, and personal care items. Although net sales rose by 2.5% to $165.6 billion, they slightly missed analyst expectations.
Walmart's e-commerce sales increased by 21% in the U.S. and 22% globally, marking the first quarter where the e-commerce division recorded profitability. This growth is attributed to higher-margin businesses, including online advertising and its marketplace offerings. The retailer reported an adjusted profit of 61 cents per share, surpassing the anticipated 58 cents per share by analysts.
Looking ahead, Walmart expects second-quarter consolidated net sales growth between 3.5% and 4.5%, slightly above analyst predictions of 3.46%. CFO Rainey noted that as the range of near-term outcomes widens, it becomes increasingly difficult to predict operating income growth and earnings per share for the second quarter. However, he expressed optimism about navigating the full year successfully, stating, "With a longer view into the full year, we believe we can navigate well and achieve our full-year guidance."
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