Source: Wall Street Journal.
Despite strong performance this quarter, Walmart has warned that starting this month, the company will raise prices on some commodities due to tariffs and escalating economic turmoil. In recent weeks, most consumer-facing companies in the USA have reported weak performance, attributed to unstable demand and economic weakness.
The global retail giant $Walmart (WMT.US)$ released strong quarterly results, but at the same time warned that due to tariffs and increasing economic turmoil, it will begin to raise prices on some commodities starting this month.
Earnings reports show that for the quarter ending April 30, Walmart's same-store sales in the USA grew by 4.5%, with adjusted EPS of $0.61. This performance exceeded Wall Street analysts' expectations, indicating that its strategy of lowering prices to gain market share is working.
However, the shadow of unpredictable tariff policies looms, causing a slowdown in Walmart's trade growth and fluctuations in sales, with grocery and pharmacy sales remaining strong, while sales of daily necessities have declined. Worse yet, the price increases triggered by tariffs are expected to soon affect the shelves.
Walmart's Chief Financial Officer John David Rainey stated in an interview:
"If you haven't noticed it, it will happen in May and then become more apparent."
This means that consumers relying on Walmart's low-price strategy will soon feel the impact of tariffs.
With the shadow of tariffs looming, is the retail trade facing a "critical point"?
Despite the company's plan to maintain its annual sales and profit guidance, it has chosen not to provide revenue guidance for the current quarter due to "ongoing trade discussions that are changing weekly or even daily." The company stated in a statement:
"In today's dynamic operating environment, the lack of clarity makes very recent forecasting extremely difficult."
Rainey stated that the range of outcomes is "quite extreme," and the company is preparing for greater impacts from trade wars and overall economic downturns in the coming months.
Trump's tariffs have disrupted the operations of businesses across various industries. In recent weeks, most Consumer-facing companies in the USA have reported weak performances due to unstable demand and economic weakness. Procter & Gamble and The Kraft Heinz have cut their annual outlook, while Airlines like Southwest Airlines express concerns about the impending economic recession.
"The current retail environment is challenging, with prices rising so quickly. There has never been a precedent for prices rising this high, this fast," Rainey stated:
"The magnitude of the tariff increases is such that retailers cannot absorb these costs on their own."
Walmart warns: more tariff pain lies ahead.
In the face of various challenges, Walmart is better positioned than Other Retailers. The company's Global supply chain allows it to source products from multiple regions, and its scale means it can negotiate better deals with suppliers.
Despite Walmart's good performance, it still warns investors that there will be more pain from tariffs in the future, which is an ominous sign.
Rainey stated that sales this quarter experienced greater weekly fluctuations compared to last year, pointing out factors putting pressure on short-term profits: after the implementation of tariffs, the company hopes to be prepared to invest in prices, while consumers are purchasing more groceries that typically have lower profit margins. Categories such as electronics, home goods, and Sporting Goods have already been impacted, and the rise in egg prices this quarter is also noteworthy.
Editor/jayden
