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Seeing No Impact from Tariffs, Walmart Raises Full-Year US Comps Guidance

While Walmart Inc.’s chief financial officer said the discounter continues to monitor ongoing tariff discussions, the company’s second-quarter earnings results indicate the retailer has been able to manage both pricing and margins.

In a Nutshell: Brett Biggs, executive vice president and chief financial officer, said in a prepared fireside chat, “Our merchants continue to execute appropriate mitigation strategies as our goal is to be the low-price leader. Over the past several months, the team has been able to thoughtfully manage pricing and margins with both our customers and shareholders in mind.”

The company is currently reviewing the Trump Administration’s recently released list for Tranche 4 tariffs. Walmart raised full-year earnings guidance, against the backdrop of more tariffs to come, both on Sept. 1 for imports on List 4A from China and on Dec. 15 for the balance of items on List 4B. Biggs said, “Our updated guidance reflects our current understanding of the timing of tariff implementation on various categories as List 4 affects a larger part of our assortment than the prior tariffs.”

Net Sales: Walmart said total revenues rose 1.8 percent to $130.4 million from $128 million. Comp sales were up 2.8 percent, and accelerated sequentially on a two-year stacked basis to 7.3 percent. Doug McMillon, president and chief executive officer, said in the prepared remarks that the latter represents the “strongest growth in more than 10 years.”

E-commerce sales grew 37 percent, reflecting strength in online grocery and Walmart.com. The discounter said it is starting an InHome Delivery service in the fall, in which a group of highly-trained Walmart associates will begin delivering groceries directly into the homes of customers. And the retailer recently launched NextDay delivery, with McMillon noting that Walmart has already reached its annual goal of serving 75 percent of the U.S. population. “We’re working to expand it even further, including the available assortment. Customers are responding well, and we’re improving our economics by having inventory close to the customer, which helps us reduce split shipments and the use of air freight,” the CEO said.

At Sam’s Club, comps improved sequentially to 4.2 percent, while growth in membership income of 2.8 percent reflects progress that Walmart is making on attracting and upgrading its warehouse memberships.

Sales at Walmart International slipped 1.1 percent to $29.1 billion, but the operation saw nine of 10 markets post positive comp sales in the quarter. McMillon said he was pleased with the progress the company is making in China, and noted that Walmex continues to deliver strong top line results. Sales growth in Mexico “outpaced” the market and the team “posted comps of 5.5 percent on solid growth in traffic and ticket. We saw good results in food and consumables and strength in apparel,” the CEO said.

Earnings: Net income fell 19.3 percent to $3.6 billion, or $1.26 a diluted share, from $4.47 billion, or $1.55, a year ago. On an adjusted basis, EPS was $1.27. Wall Street was expecting $122 on revenues of $130.11 billion.

“For Walmart U.S. comp sales, strong first-half results lead us to increase our full-year expectations, excluding fuel, to the upper end of the original guidance of up 2.5 to 3 percent,” Biggs said.

CEO’s Take: McMillon said, “Customers are responding to the improvements we’re making, the productivity look is working and we’re gaining market share. We have good momentum, and I look forward to what we’ll accomplish during the back-half of the year.”

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