Walmart's tariff troubles begin to bite but company posts first profitable quarter in e-commerce
Reuters Walmart customers browse aisles as the retailer faces new challenges from rising tariffs, despite celebrating a historic first in e-commerce profitability REUTERS/Lisa Baertlein/File Photo
Walmart navigates tariffs and tensions while boosting online growthInside the aisles of Walmart stores across the country, US shoppers are spending more per trip but not without concern. At the company's Bentonville, Arkansas headquarters, executives say the impact of rising tariffs is becoming harder to ignore, and consumers will likely start noticing higher prices soon.Yet amid the economic uncertainty, Walmart marked a major milestone: its first profitable quarter in e-commerce both in the US and globally, powered by higher-margin ventures like online advertising and its expanding third-party marketplace.
Also read: Donald Trump blasts Walmart over tariffs! Here's what US President tells retail giant with 255 million customers
Mixed earnings as trade policy clouds outlook Walmart beat Wall Street's earnings expectations for the first quarter but fell slightly short on revenue, posting $165.61 billion compared to the expected $165.84 billion. Adjusted earnings per share came in at 61 cents, exceeding the 58 cents anticipated. However, net income dipped to $4.49 billion from $5.10 billion a year earlier.
It was the first time since February 2020 that Walmart missed quarterly revenue expectations, highlighting the unpredictable retail landscape.Comparable store sales rose 4.5 per cent at Walmart U.S. and 6.7 per cent at Sam's Club, excluding fuel. E-commerce sales soared 21 per cent in the US and 22 per cent globally, extending Walmart's streak of double-digit online growth to a twelfth consecutive quarter.Tariff pressures signal price hikes aheadWalmart Chief Financial Officer John David Rainey voiced concern about the burden of US tariffs, even with the Trump administration's 90-day move to ease duties on Chinese imports to 30 per cent. Rainey noted that the size of recent tariff increases is beyond what retailers or suppliers can absorb.
Also read: Trump tells Walmart to 'eat the tariffs,' blames China for price hikes 'It's more than any supplier can absorb. And so I'm concerned that consumer is going to start seeing higher prices,' he told CNBC.CEO Doug McMillon added that tariffs on key categories such as toys, electronics, bananas, avocados and flowers are creating mounting cost pressures. For now, Walmart is choosing to absorb some of those costs, holding down prices on popular items like Mother's Day flowers.Walmart declined to provide earnings-per-share or operating income guidance for the second quarter, citing continued volatility in US trade policy.
Strong consumer traffic but signs of spending caution The company reported a 2.8 per cent increase in average ticket size and a 1.6 per cent rise in customer transactions year over year. However, Rainey described sales in the quarter as 'a little choppy.' February lagged expectations, March was more in line, and April rebounded. So far, May appears to be following April's stronger momentum.Despite fears of inflation, Rainey said US consumers remain cautious but consistent: 'They're discerning. They're mindful... but their behaviors largely have not changed.'
Also read: US' largest private employer to start hiking prices this month due to Trump's tariff
Still, Walmart has begun reducing order volumes for products it expects will be impacted by tariff-related price increases, although it has not canceled any orders outright.
E-commerce profit milestone and rising advertising revenue Walmart's strategic investments in its digital ecosystem are beginning to pay off. The retail giant reported its first-ever profitable quarter for e-commerce operations, a major achievement driven by Walmart Connect, the company's fast-growing US advertising business, which saw a 31 per cent year-over-year increase in Q1.Its Walmart+ subscription service also continues to attract value-conscious and time-starved consumers, including middle- and upper-income households. The company's recent acquisition of Vizio is expected to further enhance its digital and retail integration.
Retail rivals brace for tariff impact Walmart's earnings release kicks off a wave of quarterly reports from other major US retailers, including Target, Lowe's and Home Depot, all of which will likely provide more clues about how the American consumer is holding up under the weight of higher costs.Walmart remains in a stronger position than many peers, due to its dominance in grocery and everyday essentials, which generate steady foot traffic and build brand loyalty.Shares of Walmart are up 7 per cent year to date, outperforming the broader S&P 500. The stock closed at $96.83 on Wednesday, May 14, giving the company a market value of about $775 billion.
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