Even Walmart, the largest and most successful retailer in the United States, announced a drop in first quarter profit. In retaliation, the company raised prices in order to cover new expenses due to tariffs imposed during the previous administration. The company’s adjusted earnings per share reached 61 cents, surpassing industry analysts’ projections of 58 cents. Yet, Walmart’s top line grew just 2.5% to $165.61 billion, coming in below expectations.
Walmart’s CEO, Doug McMillon, highlighted the impact of tariffs on grocery prices, which represent approximately 60% of Walmart’s U.S. business. The retailer brings in around 66 percent of its goods from the United States, a number largely fueled by the retailer’s grocery business. Tariffs on imports from other Central and South American countries, such as Costa Rica, Peru and Colombia have skyrocketed. Consequently, consumer staples like bananas, avocados, coffee, and even roses have much larger price tags attached to them today.
After having been long shielded from price increases on its shelves since April, the chickens came home to roost in May. McMillon stated that while the company is committed to maintaining low prices, it cannot absorb all the cost pressures resulting from tariffs.
“We will do our best to keep our prices as low as possible,” – Doug McMillon
The CEO further elaborated on the challenges posed by increased tariffs:
“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.” – Doug McMillon
Walmart carries general merchandise, sourced from all over the world. Most electronics, toys, and other manufactured goods come predominantly from China. A wave of shipping price inflation disrupts the retailer’s supply chain. All of this is causing companies to scramble to get their products to the U.S. This new market entry is likely to exacerbate price increases going forward.
Even with these headwinds, Walmart held onto the positive full-year outlook provided in February, a strong vote of confidence on its higher-level prospects. Additionally, Walmart’s global e-commerce sales showed robust growth, rising 22% from the previous quarter’s 16%. This tremendous growth is a testament to a strategic shift—their move to prioritize e-commerce and adapt to consumer needs has paid off.
While Walmart continues to experience these headwinds from tariff-related cost increases and shipping pressures, the company continues to keep its eyes on the long-game. The company has implemented hedges against some tariff threats and continues to explore avenues for growth in both physical and online sales.
