A Walmart Supercenter in Burbank, California, on Nov. 21, 2024.
Allen J. Schaben | Los Angeles Times | Getty Images
DALLAS — Walmart on Wednesday scrapped its outlook for operating income in the first quarter, citing uncertainty about the potential impact of sweeping tariffs on China, Vietnam and other key sources of goods across the globe.
In a news release, the discounter said it wants to “maintain flexibility to invest in price as tariffs are implemented.” It said it widened the operating income guidance for the fiscal first quarter, but did not provide a new range It had projected an increase of 0.5% to 2.0% in adjusted operating income in the fiscal first quarter.
Walmart maintained its first-quarter sales outlook of 3% to 4% growth.
The financial outlook and comments from executives came before President Donald Trump increased tariffs on goods from China to 125% and temporarily reduced duties on imports from dozens of other countries to 10%. Treasury Secretary Scott Bessent has said some 70 countries have reached out to the White House for talks about the levies.
Walmart shares climbed more than 9% on Wednesday following Trump’s announcement.
In an investor presentation on Wednesday, Chief Financial Officer John David Rainey said “operating income has been harder to predict and we’ve widened our internal range of scenarios, given the current backdrop.”
Rainey said Walmart is “still working through what this [new tariff environment] means for us.” About two-thirds of what Walmart sells in the U.S. is made, grown or assembled in the U.S., he said. The third that Walmart imports comes from across the globe, he said, but China and Mexico are the “most significant.”
He said in the current quarter, “the uncertainty and decline in consumer sentiment has led to a little more sales volatility week to week and frankly, day to day.”
Sales trends with general merchandise, a category outside of the grocery department that tends to be more profitable, were weaker in the quarter but have improved as the period has gone on, he said.
“We’re focused on the long term,” he said. “What history tells us is that when we lean into these periods of economic uncertainty, Walmart emerges on the other side with greater share and a stronger business. And we don’t expect this current period to be any different.”
Walmart’s announcement comes as major U.S. companies start to speak out about the uncertainty the tariffs have created for their businesses. Delta also said bookings have suffered due to the trade war and said it will not expand flying in the second half of the year.
Though it said the uncertainty around tariffs made it hard to predict first-quarter operating income, Walmart stuck by its full-year guidance. The discounter said in February that it expects full-year net sales to grow 3% to 4% and adjusted operating income to increase between 3.5% and 5.5% on a constant currency basis. That includes a 1.5 percentage point headwind from acquiring smart TV company Vizio and from having a leap year in 2024.
The company said in February that it expects full-year adjusted earnings of $2.50 to $2.60 per share, which includes a 5 cent per share headwind from currency.
Along with tariff-related uncertainty, Walmart also blamed pulling the first-quarter operating income guidance on insurance-related costs and a less favorable mix of merchandise. The company’s leaders have spoken frequently about how inflation has made U.S. consumers more value conscious and selective, causing some to buy lower-margin necessities like groceries and household items instead of higher-margin items like clothing.
Walmart in ‘a fluid environment’
Walmart’s announcement came ahead of an investor presentation on Wednesday by the retailer’s top leaders. It is part of a two-day event in Dallas.
In his opening remarks on Tuesday, CEO Doug McMillon acknowledged the strange time that the retail giant found itself in.
“Clearly, our environment has changed, so that makes this really exciting for us,” he said, eliciting a laugh from the room of investors, bankers and reporters.
“We’ve learned how to manage through turbulent periods,” he said. “Especially these last couple of years, it has been one thing after the other.”
“It’s clearly a fluid environment,” he said. “And while we don’t know everything that’s going to happen, of course, we do know what our priorities are, and we know what our purpose is, and we’ll be focused on keeping prices as low as we can. We’ll be focused on managing our inventory and our expenses well.”
Read More: Walmart says Trump tariffs could hit quarterly profits as it tries to keep prices low