The China Mail - Walmart expects better sales, earnings as shoppers squeezed by tariffs

The company noted, in reporting its second quarter results, that imported goods are becoming more expensive. Even as it keeps prices low for as long as possible, Walmart said costs are rising as it replenishes inventory at post-tariff price levels.

Shoppers, particularly middle- and lower-income households, have also pulled back in categories that have become pricier, switching instead to other items, said Chief Executive Doug McMillon on a call with analysts.

Walmart is among major retailers reporting their financial results this week, with markets keeping close tabs on consumer patterns -- and signs of price increases -- as tariffs bite.

As the country's biggest retailer, it is seen as a bellwether for consumer sentiment on the economy.

Its latest results suggest households have become more cautious but continue heading to the retailer for staples and other products.

The company topped analysts' quarterly sales estimates, with revenues for the three months ending July 31 at $177.4 billion, up 4.8 percent from the same period a year ago.

But it missed earnings expectations with adjusted earnings-per-share (EPS) at 68 cents, lower than anticipated.

US companies have been squeezed in recent months as tariffs raised the costs of importing certain foreign goods, although many mitigated the blow to consumers by bulking up on inventory before Trump introduced the new levies.

The overall impact on US consumer prices appears limited for now, but economists are closely monitoring the pass-through of costs to gauge if the inflation hit will be a one-off or if there will be lingering effects.

In its second quarter results released Thursday, Walmart raised its outlook, anticipating net sales to rise between 3.75 percent and 4.75 percent for the fiscal year, up from earlier expectations of 3.0 percent to 4.0 percent.

It also raised its adjusted EPS outlook to a range of $2.52 to $2.62, up from $2.50 to $2.60 per share before.

Walmart shares slumped 4.4 percent in early trading.

- Price pressures -

"The impact of tariffs has been gradual enough, and any behavioral adjustments by the customer have been somewhat muted," McMillon said in the call.

He expects, however, for business costs to rise as inventory comes in at higher tariff levels -- a trend likely to "continue into the third and fourth quarters."

Among segments, Walmart's global e-commerce sales rose 25 percent.

It noted that net sales growth internationally was boosted by segments including China, Mexico and Central America.

E-commerce sales were up 26 percent for the United States, Walmart added.

Sales through store-fulfilled delivery channels grew nearly 50 percent, the company added.

It noted strong sales growth as well in grocery, alongside health and wellness.

Since returning to the presidency in January, Trump has imposed a 10-percent tariff on goods from most trading partners.

Earlier this month, the 10-percent rate rose to varying levels for dozens of economies including the EU, Japan and South Korea, even as several had struck deals to avert even steeper levies.

In May, Walmart warned of price increases due to higher tariffs, saying it might not be able to absorb all the additional pressures.

In an earnings presentation released Thursday, Walmart maintained that it had "strong inventory management."

J.Liv--ThChM