MIAMI, FLORIDA – JANUARY 24: A cart sits outside of a Walmart store on January 24, 2023 in Miami, … More
Walmart, the nation’s largest retailer with its “Save Money. Live Better.” promise, dropped a bombshell in the first quarter earnings call when CEO Doug McMillon announced that tariffs are going to force the company to raise prices.
The message spread further when President Trump took to Truth Social to tell the company to back off. “EAT THE TARIFFS,” he wrote, adding that Walmart made billions of dollars last year “far more than expected” – $681 billion to be exact – implying Walmart would be profiteering if it jacked up prices. “Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain,” he continued.
Headlines aside, the company gave far more reasons why it is prepared to hold the line on prices rather than increase them due to tariffs. It seems Walmart is following the maxim, “Never let a good crisis go to waste,” leveraging the disruption from Trump’s tariffs to widen the gap between itself and competitors like Amazon and Costco. Ultimately, Walmart aims to emerge as the customer’s hero once the tariff issue is resolved, reporting that its prices remained largely unchanged after all.
McMillon said the company will “play offense” and “opportunistically invest” to improve its value proposition, and the key to that is being the low-cost leader.
CFO John Rainey added, “While operating conditions are expected to remain dynamic, our strategy is clear. Our top-line momentum is strong, and we’re flexing into our advantages to protect margins as we grow. History tells us that when we lean into these times of economic uncertainty, we emerge on the other side as a stronger company. We expect this time to be no different.”
Topline Results
Amidst the tariff turmoil, in the first quarter ending April 30, Walmart reported an impressive 4% growth constant currency – 2.5% on a reported basis – to $165.6 billion and operating profits rose 3% constant currency. Earnings per share increased 1.7% to $0.60 on an adjusted basis.
Diving deeper, e-commence sales rose 22% across the board and for the first time, the e-commerce business was globally profitable. Membership and other revenues reached $1.6 billion, up 3.7%.
Walmart U.S. generated $112.2 billion revenues, up 3.2%, and adjusted operating income topped $5.7 billion, a 4.4% increase. Sam’s Club U.S. totaled $22.1 billion, up 2.9%, with operating income of $700 million, an 11.5% increase. Walmart International was basically flat though operating income fell 6.4% constant currency.
Given the uncertainties around tariffs, the company provided no second quarter guidance on operating income growth or earnings per share; however, net sales are expected to advance 3.5% to 4.5% on a constant currency basis.
And Walmart continues to hold year-end guidance announced in February. Net Sales are expected to rise between 3% and 4%, income to grow between 3.5% and 5.5% and EPS will be in the $2.50 to $2.60 range.
“We delivered a solid first quarter in a dynamic operating environment,” McMillon said in a statement. “We’re well positioned, maintaining flexibility to navigate the near-term while continuing to invest to create value in the long-term.”
Working With Tariffs
With tariffs set to disrupt Walmart’s U.S. business, which accounted for some 80% of revenues last year, McMillon said, “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.”
Yet he added, “We will do our best to keep our prices as low as possible,” and began a long list of ways it will continue to keep prices low, starting with 66% of what Walmart sells is made, assembled or grown in the U.S., totaling $296 billion last year. And it is adding more products sourced from domestic small businesses through its annual “Open Call” event each October and “Grow With Us” program.
Having a well-managed inventory and being able to forecast accurately what’s needed from suppliers on an on-going basis will also help control prices, as will being the retail partner of choice for its suppliers given Walmart’s scale.
Growth in its higher-margin businesses, specifically memberships, advertising and premium same-day delivery, give it more levers to pull to deliver profits. For example, Rainey reported in the buy-side follow up call that after a customer experiences their fourth fast delivery, their spending in-store and online triples.
Flexibility Across Categories
Another advantage for Walmart as tariffs kick in is the breadth of its assortment, with some categories experiencing price pressure more than others. For example, general merchandise categories, like electronics and toys, will be more impacted by tariffs on China.
On the other hand, food prices will be less affected, with the exception of imported items, such as bananas, avocados, coffee, and roses.
McMillon said, “We want to keep our food and consumables prices as low as we can. Food prices in the US have gone up in recent years and our customers have been feeling that all along. We won’t let tariff-related cost pressure on some general merchandise items put pressure on food prices.”
Overall, grocery accounted for 60% of revenues last year and general merchandise 25%, with health and wellness making up 14% and 2% other, according to Statista.
Given the breadth of the company’s product offerings, McMillon stated, “In some cases, we’ll absorb costs within a category or department and not simply pass on a tariff cost attributable to each item individually. We’ll be managing mix across items, categories and businesses.”
In other words, any eventual price increases will be made on a case-by-case basis depending on the elasticity of demand. Some items and categories can sell through at higher costs, many others can not and Walmart will manage for that.
“We continue to be confident in our ability to strengthen this business even as we navigate cost of goods changes,” McMillon said, adding, “We’re positioned to manage the cost pressure from tariffs as well or better than anyone.”
Playing Offense
Throughout the earnings call, McMillon and Rainey stressed that the company is taking a long-term view of the short-term tariff disruption, though they don’t where tariffs will land eventually.
They also underscored the company is going on the offense to make the most of what is to come. “We’re going to be playing offense. We want to be aggressive,” Rainey explained in the buy-side follow up call.
Given Walmart’s aggressive posture and its dominant lead as the nation’s number one retailer, it’s reasonable to assume the price increase notice is a decoy move, intended to encourage competitors to raise their prices, all the while quietly planning to hold the line on theirs.
The Wall Street Journal’s Sarah Nassauer acknowledged Walmart’s bellwether status. “It’s significant for other retailers as well because Walmart is one of the biggest and they’re going to sort of set the tone. So if they’re saying this, that means other retailers are probably going to have similar approaches.”
However, just like a fake play-action pass in football, Walmart’s price hike announcement could be intended to lead competitors astray and get them to make reactive moves while playing to win in the long run.
“We know that this is the time when value matters most. And we tend to look back on the periods similar to this in the past, and we’ve gained share and come out of the other side stronger. And so, we’ll want to do that this time as well,” Rainey concluded.
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Source: https://www.forbes.com/sites/pamdanziger/2025/05/19/how-walmart-will-use-tariffs-to-its-advantage-and-hold-the-line-on-prices/