U.S. retailing giant Walmart will have to start raising prices later this month due to the high cost of tariffs, its top executives said on Thursday, even as the company's comparable sales surpassed expectations in the first quarter.
Shares of the Bentonville, Arkansas-based company edged up 0.5% in pre-market trading. Its stock is up more than 60% over the past year. Yet, Walmart became the latest to avoid giving second-quarter profit guidance on Thursday due to the uncertainty around Donald Trump's tariffs that have roiled world trade.
U.S. shoppers will start to see prices rise at the end of May and certainly in June, Walmart's Chief Financial Officer John David Rainey said in a CNBC interview.
"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," CEO Doug McMillon said in a statement.
Analysts said Walmart can lean on its suppliers and squeeze out efficiencies to shield customers from tariffs, but they can only do that for so long.
"There will likely be some demand destruction from tariffs, a complete wreck is unlikely," said Brian Jacobsen, chief economist at Annex Wealth Management.
Telsey Advisory Group analyst Joseph Feldman said he expects Walmart to have more flexibility in spreading the price hikes because of the broad range of goods it offers, which could make it more palatable for the consumer.
"My sense is Walmart will manage (tariffs) better than almost every other retailer, and they will be able to continue to generate solid profit," Feldman said. On Thursday, the largest U.S. retailer kept its annual sales and profit forecast intact for fiscal 2026.
It continues to expect adjusted earnings per share for the fiscal year ending January 2026 in the range of $2.50 to $2.60 and annual sales to rise between 3% and 4%.
Jacobsen said Walmart withholding its second-quarter profit guidance made sense, and he found it encouraging that they didn't also pull their full-year forecasts. He anticipates the effects of fluctuating tariffs to balance out over a longer timeframe.
Many U.S. companies have either slashed or pulled their full-year expectations in the wake of the trade war, as consumers stretch their budgets to buy everything from groceries to essentials at cheaper prices.
U.S. consumer sentiment ebbed for a fourth straight month in April, signaling watchful purchasing, while the country's gross domestic product (GDP) contracted for the first time in three years during the first quarter, fanning worries of a recession.
Walmart is a bellwether of U.S. consumer health and is the first to kick off results for the U.S. retail industry. Its report explains how the industry navigates economic volatility wrought by the on-and-off tariffs on several countries, including China.
Same-store sales in the first quarter grew by 4.5%, driven by increases in both transactions and unit volumes, the company said. Transactions rose 1.6%, while the average spend at the till rose 2.8%, with shoppers reaching for more dairy and pantry products, fresh food and personal care items.
Analysts, on average, were expecting a 3.94% increase in U.S. same-store sales, according to data compiled by LSEG. Net sales rose 2.5% to $165.6 billion, a hair shy of estimates.
U.S. e-commerce sales rose 21%, while globally they rose 22%. This was the first time Walmart's eCommerce business achieved a full quarter of profitability, benefiting from higher-margin businesses, including online advertising and its marketplace, the company said.
The retailer reported a quarterly adjusted profit of 61 cents per share. Analysts, on average, were expecting 58 cents per share.
It expects second-quarter consolidated net sales to be between 3.5% and 4.5%, compared to expectations of 3.46% growth.
As the range of near-term outcomes widens and becomes hard to predict, the company is withholding second-quarter operating income growth and earnings per share forecasts, CFO Rainey said.
"With a longer view into the full year, we believe we can navigate well and achieve our full year guidance," he added.
