Walmart's Q1 Profits Fall 14% Due to Trump-Era Tariffs, Prices to Rise

Walmart, the largest retailer in the United States, reported a decline in first-quarter profits, attributing the decrease to rising costs due to tariffs imposed by Donald Trump. The company announced strong quarterly sales on Thursday and indicated that it expects to raise prices as a result of the increased costs. This move comes as the retailer navigates the challenges posed by the ongoing trade tensions and their impact on the global supply chain.

The tariffs have significantly increased the cost of goods for Walmart, forcing the company to consider price adjustments to maintain profitability. This decision reflects the broader impact of trade policies on the retail sector, where companies are grappling with higher operational costs and the need to balance consumer demand with financial sustainability. Walmart's strategy to mitigate the effects of tariffs involves a delicate balance between maintaining competitive pricing and ensuring that the company's financial health is not compromised. The retailer's decision to raise prices is a clear indication of the economic pressures it faces, as well as the broader implications for consumers who may see an increase in the cost of everyday items.

In the quarter ending April 30, Walmart's earnings were 44.5 billion dollars, with earnings per share at 56 cents, down from 51 billion dollars and 63 cents per share in the same period last year. Adjusted earnings per share were 61 cents, exceeding analyst expectations of 58 cents. Revenue grew by 2.5% to 165.61 billion dollars, slightly below analyst estimates. Walmart's U.S. comparable sales, which include both in-store and online sales, grew by 4.5% in the second quarter, although this growth rate was slower than the previous quarter's 4.6% and lower than the 5.3% growth rate in the third quarter of 2024.

Walmart's business benefited from strong sales in health and wellness products and groceries. The company noted that sales of home goods and sporting goods were weaker, but strong sales in toys, automotive supplies, and children's clothing offset these declines. Global e-commerce sales grew by 22%, higher than the previous quarter's 16%.

Walmart's CEO, Doug McMillon, stated in a press release, "We will do everything we can to keep prices as low as possible, but given the magnitude of the tariffs, even at the reduced levels announced this week, we cannot absorb all the pressure given the thin retail profit margins."

Walmart is one of the first major U.S. retailers to report its financial results, providing some insight into consumer spending trends and the impact of tariffs on its business. Earlier this month, Amazon reported first-quarter profits and sales that exceeded analyst expectations, highlighting the online giant's appeal to price-conscious shoppers in an uncertain economic environment. Before the tariffs took effect, Amazon had already imported foreign goods. Amazon's president and CEO, Andy Jassy, told analysts on the earnings call that many of its third-party sellers had taken similar actions, allowing a significant portion of these sellers to maintain their pricing.

Walmart has taken several measures to address the tariff threat. Two-thirds of its products are sourced in the United States, with a significant portion being groceries. Groceries account for about 60% of Walmart's U.S. business. However, Walmart is not immune to the impact of tariffs, and the company stated that despite efforts to absorb the tariff costs, it will still need to raise prices.

Walmart's financial report highlights the challenges faced by retailers in the current economic climate, where tariffs and trade disputes are adding to the operational costs. Walmart's approach to managing these challenges will be closely watched by industry analysts and competitors, as it sets a precedent for how other retailers may respond to similar pressures. The company's decision to raise prices reflects the broader economic challenges faced by retailers and the need to adapt to a changing market landscape. As Walmart navigates these challenges, its strategies will serve as a benchmark for other retailers facing similar issues.