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Walmart Could Raise Prices Amid Tariff Turmoil

Walmart Inc. had the best increase in first-quarter comparable store sales in nine years, and the retailer reported better than expected profits as it continues to make the shopping experience faster and more efficient for consumers. However, as much of the industry is, Walmart is monitoring the tariff situation, which could play a key role in future quarters.

In a Nutshell: Brett Biggs, executive vice president and chief financial officer, said during the company’s prepared remarks to analysts, “We’re monitoring the tariff discussions and are hopeful that an agreement can be reached. Our goal is to always be the low-price leader, and we will actively manage pricing and margins as warranted with our customers and shareholders in mind. Our merchant teams have been focused on this for months and continue to execute appropriate mitigation strategies.”

Total inventory for Walmart U.S. operations rose 5.9 percent for the quarter, which Biggs said was “due to some accelerated buying in certain categories” and working in the timing of sales for summer seasonal merchandise. That suggests that perhaps one mitigation strategy might have been to order more goods ahead of time in case of any tariff increase. Also, boosting a bit of the increase in buying was the company’s effort to track e-commerce inventory so that it could fulfill next-day deliveries from

And while Walmart has the ability to work with its vendors to help keep prices down, it’s not immune to having to raise prices if it that’s what it has to do. Biggs also said while food inflation remained negligible in the quarter, “we did see a modest increase in consumables inflation.”

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Still, Walmart may be in a better position than most retailers when it comes to how it can weather the potential additional tariffs later this summer.

Credit analyst Charlie O’Shea from Moody’s Investors Service said the potential impact on “Walmart and its shoppers is limited by its food business, and we also believe Walmart has the wherewithal both financially and via its vendor relationships to minimize the impact on both itself and its shopping base.”

As for the mass discounter’s first-quarter results, O’Shea said, “Walmart continues to realize meaningful gains on its various strategic investments, with pronounced U.S. acceleration in both online and physical formats for the first quarter, as evidence by 37 percent online growth and 3.4 percent growth in comparable store sales.” He noted that the company’s “price investments are continuing” and that “improved efficiencies are serving to protect margins.”

Net Sales: For the three months ended April 30, Walmart said net sales rose 1.1 percent to $122.95 billion from $121.63 billion. Membership and other income brought total revenues up 1 percent to $123.93 billion.

Sales at Walmart U.S. were up 3.3 percent to $80.3 billion. U.S. comp sales rose 3.4 percent, reflecting the best first-quarter comp for the discounter in nine years and the fourth consecutive quarter above 3 percent. The company also said that home and fashion categories, as well as groceries, helped to grow e-commerce sales to 37 percent in the quarter.

Overseas, Walmart International sales were down 4.9 percent to $28.8 billion. Walmart also said sales at Sam’s Club rose 1.5 percent to $13.8 billion, while comp sales inched up 0.3 percent as e-commerce sales grew 28 percent.

Earnings: Net income jumped 80 percent to $3.64 billion, or $1.33 a diluted share, from $2.13 billion, or 72 cents, a year ago.

Wall Street was expecting adjusted diluted earnings per share of $1.02 on revenues of $124.98 billion.

Looking ahead, Biggs said, “Our first-quarter results put us in a good position to achieve full-year goals. Although we face tougher sales comparisons in Q2 due to the timing of weather-related benefits last year, the underlying business is strong and the omni-strategy is working….As is our practice, we will update certain full-year guidance with our second-quarter release.”

CEO’s Take: Doug McMillon, Walmart’s president and chief executive officer, said, “We’re continuing our transformation to become more of a digital enterprise. At every step along this journey, we’re staying focused on the customer and they are noticing.” He cited to the quarter’s comps sales growth of 3.4 percent and e-commerce sales gain of 37 percent. The CEO also spoke about the company’s sustainability initiatives and its goal to reduce supply chain emissions.

As for the discounter’s operating segments, McMillon said, “Operationally, we’re making the shopping experience at Walmart faster, easier and more efficient through new ways of interacting with us. As merchants, we’re on a never-ending journey to provide customers with the items they want.”

He also noted the work of Walmart’s incubator, Store No8, which launched a new project called Intelligent Retail Lab. The lab allows the discounter to explore how “AI can contribute to the store experience through real-world solutions. The team will initially focus on inventory and shelf availability, and we’ll be in data gathering mode early on.”