Comparable sales were strong for Walmart in the first quarter, up 3.4%. Can that momentum be sustained with higher tariffs on China? Bloomberg’s Matthew Boyle reports:
Walmart Inc. advanced after meeting sales estimates and indicating that shoppers will absorb some of the costs from President Donald Trump’s tariffs on Chinese imports.
Comparable sales for Walmart stores in the U.S. climbed 3.4% in the first quarter, its best for the period in nine years. Sales of groceries — Walmart’s biggest business — fueled the increase, and a later-than-usual U.S. flu season boosted health and wellness products. The shares rose as much as 4.1% Thursday in New York, the biggest intraday gain in almost three months.
“This is a very good set of results,” Neil Saunders, an analyst at GlobalData Retail, said in a note. “The U.S. operation remains the star of the show.”
Walmart’s response to potential higher levies will likely set the tone for other discount retailers, and its decisions on whether to pass along or absorb the additional costs will have ripple effects on American consumers. In its favor, Walmart’s clout with suppliers gives it more room to maneuver, and much of its food comes from U.S. sources, easing the impact.
“We will do everything we can to keep prices low, but increased tariffs lead to increased prices,” Chief Financial Officer Brett Biggs said in a Thursday morning interview. “It’s very item- and category-specific. There are some places where as we get tariffs, we will take prices up.” Finding alternative manufacturers “is one of a number of actions that our merchants are considering.”
Tariffs, according to Evercore ISI analyst Greg Melich, are “the next key swing factor,” as they could “wipe out” earnings growth across the sector this year.
Read more here.
Jeremy Jones, CFA
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