Walmart to raise prices amid tariff pressures despite strong Q1 sales performance
Walmart reported a dip in first-quarter profit on Thursday and said it will raise prices due to mounting tariff-related costs stemming from policies implemented by President Donald Trump.
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While the retail giant posted strong sales, it acknowledged growing challenges that could weigh on future performance.
The company earned $4.45 billion, or 56 cents per share, for the quarter ended April 30, compared to $5.10 billion, or 63 cents per share, in the same quarter a year earlier. Adjusted earnings per share came in at 61 cents, surpassing analyst expectations of 58 cents, according to FactSet as reported by news agency AP.
Revenue increased 2.5% year-over-year to $165.61 billion, slightly below Wall Street projections. Walmart's US comparable sales—which include physical stores and online platforms—rose 4.5%, down slightly from the 4.6% growth in the previous quarter and the 5.3% jump seen in the third quarter of 2024.
Despite the sales gains, Walmart warned that tariff costs are forcing the company to reconsider its pricing strategy.
'We will do our best to keep our prices as low as possible,' Walmart CEO Doug McMillon told industry analysts. '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.'
McMillon noted that while price increases will appear gradually, they had already started in April and picked up pace in May. The company is particularly focused on managing costs for back-to-school merchandise.
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The Trump administration's trade policy has been a significant factor. Tariffs on Chinese goods, initially threatened at 145%, were reduced to 30% in a deal announced earlier this week. Some of those higher tariffs were also suspended for 90 days. As a result, importers who had paused shipments of goods such as shoes, toys, and clothing are now rushing to restock within the temporary reprieve.
Still, higher shipping costs and continued uncertainty are prompting many retailers—including Walmart—to raise prices to offset tariff expenses.
Although Walmart has built-in hedging strategies, it is not fully insulated. About two-thirds of its merchandise is US-sourced, primarily groceries, which account for around 60% of its domestic business. Nonetheless, general merchandise categories remain vulnerable due to global sourcing.
McMillon said that while Walmart imports from many countries, China remains a significant supplier, particularly for categories like electronics and toys.
Tariffs on imports from countries such as Costa Rica, Peru, and Colombia are also affecting prices of grocery items like bananas, avocados, coffee, and roses. According to McMillon, Walmart is absorbing some of those increased costs, especially within its general merchandise departments, and is working with suppliers to switch input materials—such as replacing aluminum (which is under tariff) with fiberglass in product components.
"We have opened this year with a bang," McMillon added, praising the resilience of Walmart's suppliers and operations despite the volatile trade environment.
Sales in the first quarter were fueled by demand in groceries and health and wellness items, though the company noted weaker sales in home and sporting goods. That softness was counterbalanced by stronger performance in toys, automotive products, and children's apparel.
Global e-commerce sales climbed 22%, accelerating from 16% growth in the previous quarter.
Shares of Walmart dropped 4% at the opening bell Thursday.
As one of the first major retailers to release quarterly results, Walmart's performance offers early insight into consumer behaviour amid economic uncertainty and ongoing tariff changes. The company said it expects second-quarter sales growth between 3.5% and 4.5% but did not provide profit guidance due to the unpredictability of US trade policies.
Other major retailers are also navigating the tariff landscape. Amazon, which reported strong Q1 sales and profits earlier this month, managed to stay ahead of the tariffs by importing goods before they took effect. CEO Andy Jassy noted that many third-party sellers on Amazon did the same.
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