Walmart signs are displayed inside a Walmart store in Mexico City, Mexico. Picture: REUTERS/EDGARD GARRIDO
Walmart signs are displayed inside a Walmart store in Mexico City, Mexico. Picture: REUTERS/EDGARD GARRIDO

Washington — Walmart said on Thursday that prices for shoppers will go up due to higher tariffs on imports from China as the world’s largest retailer reported its best comparable sales growth for the first quarter in nine years.

Walmart shares, which have gained 7% so far in 2019, rose as much as 4.1% on Thursday in New York, the biggest intraday gain in almost three months.

 US President Donald Trump increased tariffs on $200bn worth of Chinese imports to 25% from 10% last week. The move is widely expected to raise  the prices of thousands of products including clothing, furniture and electronics. China retaliated on Monday, though on a smaller scale.

Walmart CFO Brett Biggs said that higher tariffs will result in increased prices for consumers. He said the company will seek to ease the pain, in part by trying to obtain products from different countries and by working with suppliers’ “costs structures to manage higher tariffs”.

Moody’s analyst Charlie O’Shea said the potential impact on Walmart and its shoppers from tariffs is limited by its food business. Its grocery operation, which includes fresh food, contributes roughly 56% to overall revenue.

“We believe Walmart has the wherewithal both financially and via its vendor relationships to minimise the impact on both itself and its shopping base,” he said.

Biggs said the retailer has not seen signs of a slowdown in consumer spending, but he declined to comment on the health of the consumer in the near term.

Investors and analysts expect US spending to slow this year against a backdrop of rising debt, tariffs and economic uncertainty.

US retail sales unexpectedly fell in April as households cut back on purchases of vehicles and a range of other goods, reflecting a slowdown in economic growth after a temporary boost from exports and inventories in the first quarter.

Earlier this week, Walmart stepped up its battle with Amazon by offering one-day delivery in some markets without a shipping fee, weeks after Amazon announced a similar plan. Walmart said it will cost the company less than two-day shipping since orders will be delivered from warehouses closer to the customer and arrive in a single box rather than multiple packages.

Sales at Walmart’s US stores rose 3.4%, excluding fuel, in the quarter ended April 30. Analysts estimated growth of 3.1%, according to IBES data from Refinitiv.

Adjusted earnings per share increased to $1.13 per share, beating expectations of $1.02 per share.

Online sales rose 37%, slowing from the previous quarter’s 43% increase but stronger than online sales growth at most of its brick-and-mortar rivals. The company has forecast a 35% increase in online sales this year.

Total revenue was up 1% at $123.9bn but lower than analysts’ estimates of $125.03bn, dragged down by currency impact and lower international sales. Excluding currency, revenue was up 2.5% at $125.8bn. 

On Tuesday, Walmart said it was considering a stock market listing for its British supermarket arm Asda, whose attempt to combine with rival J Sainsbury was blocked by UK regulators last month.

Reuters