Commenting on first-quarter results, Doug McMillon, Walmart Inc. president and CEO, said dealing with tariffs would be a challenge for the company, but Walmart would do what’s possible to keep prices low for customers.
However, McMillon (pictured above) added that price increases have become inevitable, particularly in goods that the company sources heavily from China.
Company net income was $4.49 billion, or 56 cents per diluted share, versus $5.1 billion, or 63 cents per diluted share, in the year-before quarter. Adjusted for one-time events, earnings per diluted share were 61 cents versus 60 cents in the year-previous period.
An analyst consensus estimate published by Yahoo Finance called for earnings per adjusted diluted share of 58 cents and revenue of $164.43 billion.
Net sales were $163.98 billion and total revenues were $165.61 billion versus $159.94 billion and $161.51 billion, respectively, in the year-earlier quarter, the company indicated. Operating income was $7.14 billion versus $6.84 billion in the year-prior period, while adjusted operating income was $7.14 billion versus $7.1 billion.
Walmart U.S. net sales were $112.2 billion versus $108.7 billion in the year-past quarter, with comparable sales, excluding fuel, up 4.5% based on a $1.6% increase in transactions and a 2.8% increase in average ticket. E-commerce contributed about 350 basis points to the comp. Operating income was $5.7 billion versus $5.3 billion in the year-past period, while adjusted operating income was $5.7 billion versus $5.5 billion.
Sam’s Club net sales were $22.1 billion versus $21.4 billion in the year-past quarter, with comps, excluding fuel, up 6.7% based on a 4.8% increase in transactions and a 1.7% increase in average ticket. E-commerce contributed about 350 basis points to the comps. Operating income was $700 million versus $600 million in the year-prior period.
General merchandise sales declined slightly in the first quarter with softness in electronics, home products and sporting goods, said John David Rainey, Walmart executive vice president and CFO. Meanwhile, John Furner, Walmart U.S. president and CEO, maintained that consumers eating meals at home contributed to stronger Easter-related sales.
In the conference call, McMillon said Walmart welcomed the recent White House decision to temporarily roll back tariffs it had recently imposed, noting that the company is hopeful that the decision leads to a longer-term agreement between the United States and China that would result in even lower duties.
“We will do our best to keep our prices as low as possible,” McMillon said. “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. In retail, managing inventory is always important.”
Given the circumstances, he said: “It’s even more important and even more challenging. It’s helpful that we’re entering the second quarter with well-managed inventory. It’s helpful that we’re crossing the threshold of profitability with e-commerce globally and that we have newer, higher-margin businesses growing, like membership and advertising. It’s helpful that we sell a broad assortment that includes food, consumables, and general merchandise. It’s helpful that so much of our assortment is replenishable, which means we can flow it.”
Walmart intends to calibrate forecasts and partner with suppliers to adjust quantities over time, McMillon said, as the company navigates tariff impacts on costs.
“It’s helpful that more than two-thirds of what we sell in the U.S. is made, assembled or grown here. In recent years, our U.S. percentage has grown,” he pointed out.
In looking at the consequences of duties, McMillon said tariff-related cost pressures began to have an impact in late April and accelerated in May. He said Walmart will mitigate higher costs where it can, with an emphasis on food and consumables, while also shifting purchasing and materials used in products to deal with specific tariff effects. Still, Walmart is not in a position to hold the line everywhere, he said, noting that toys and electronics have been especially impacted by China duties. Although tariffs have been at least temporarily reduced, Walmart still faces costs higher than it can absorb.
“Even at the reduced levels, the higher tariffs will result in higher prices,” McMillon said.
In announcing the financial results, McMillon continued, “We delivered a solid first quarter in a dynamic operating environment. We’re serving customers and members in more ways, which is fueling our growth. We’re well-positioned, maintaining flexibility to navigate the near term while continuing to invest to create value for the long term.”
