Walmart warned that Americans would pay higher prices due to Donald Trump's trade war, despite punitive tariffs reached between the United States and China this week.
The world's largest retailers are particularly exposed to the President's global trade tax. One-third of the goods it sells in the United States come from other countries, and China is one of its largest sources of imports.
Washington and Beijing agreed to cut tariffs for 90 days this week, reducing our tariffs on Chinese imports from as high as 145% to about 40%.
Walmart CEO Doug McMillon said the probation was not big enough to avoid hundreds of millions of customers with rising prices.
"We will try to keep prices as low as possible, but given the extent of the tariffs, we cannot absorb all the pressure even at the lower level announced this week," he said. "Higher tariffs will lead to higher prices."
Walmart sells about a quarter of U.S. groceries and has long been the benchmark for the industry's lowest prices.
McMillon was one of the retail owners who defended tariffs at the White House last month, warning Trump of higher prices and empty store shelves.
Trump withdrew from the trade war under pressure from business leaders and market crashes. A week later, he stopped taxes on dozens of trading partners in April and promised a series of new trade deals.
The deal with China marks Trump's most important climb after the deal with Britain last week.
But Macmillan said retreats would not be enough to protect American consumers from rising prices, threatening the economic and inflation revival.
McMillan said Walmart will try to cover food prices after years of grocery inflation. But he said it needs new tariff pressures on imported products, such as bananas in Costa Rica and coffee in Colombia.
McMillon warned Thursday that Walmart reported that 4.5% of its U.S. sales per year exceeded Wall Street analysts’ 3.7% rise forecast for Wall Street analysts in the three months to the end of April.
Retailers retained financial guidance for a full year, including a forecast of 3% to 4% growth in net sales. However, it retained guidance on profits in the second quarter, citing uncertain trade pictures. Stocks fell less than 1%.
Chief Financial Officer John David Rainey said it was difficult to predict how consumers respond to tariffs and how high prices would start to reduce demand.
Macmillan said severe tariffs on China have raised prices for products including electronics and toys.
The Walmart boss said the cost pressure began in April and increased in May. He said the price increase in commodities other than groceries could last for a year.
Walmart will attempt to move the procurement of manufactured goods from where they are tariffed to where they are and change certain product components, such as using fiberglass instead of aluminum, the metal of the U.S. responsibility.
Mexico, Canada, Vietnam and India are the main sources of Walmart imports, importing along with China.
Walmart is the first major retailer to earn since Trump’s April tariff announcement. Target and Home Depot will follow next week.
Amazon warned this month that tariffs and trade policies pose risks to earnings, but the company did not report any significant increase in demand relaxation or average selling prices on its platform.
Walmart reported that its e-commerce business, including its own inventory and sales of third-party merchants using its platform, grew 22% in a year, profitable in the U.S. and globally.
The troubles of the trade war prompted shoppers to speed up buying certain items to beat tariffs, thus distorting consumer demand.
Walmart's quarterly revenue was $165.6 billion, up 2.5% year-on-year, slightly below forecast of $16.6 billion. Net income fell 12.6% to $4.6 billion, slightly higher than the consensus.