Walmart's Q1 sales increased by 2.5%, slightly below expectations, CFO warns that tariff price increases may start this month | Earnings Report Insights
Walmart's net sales in the first quarter increased by 2.5% to $165.6 billion, with comparable sales in the U.S. growing by 4.5%, exceeding expectations. Despite strong sales performance, the CFO warned that price increases due to tariffs may begin this month. The company maintained its annual sales and profit forecasts for fiscal year 2026
The "barometer" of the American economy, Walmart's net sales in the first quarter increased by 2.5% to $165.6 billion, slightly below expectations. Comparable sales in the U.S. grew by 4.5%, exceeding analysts' expectations of 3.94%.
Despite strong sales performance, the CFO warned that price increases due to tariffs may begin this month. The company maintained its annual sales and profit forecasts for fiscal year 2026.
On the 15th, Walmart announced its quarterly results for the period ending April 30:
- Walmart's net sales in the first quarter were $165.6 billion, a year-on-year increase of 2.5% (4.0% growth after excluding currency effects), with an estimate of $166.02 billion.
- Operating profit reached $7.14 billion, a year-on-year increase of 4.3%.
- Gross margin was 24.2%, up 12 basis points.
- GAAP earnings per share for the first quarter were $0.56, adjusted earnings per share were $0.61, higher than the average analyst expectation of $0.58.
Core business performance:
- Global e-commerce grew by 22%, mainly driven by in-store pickup, delivery, and third-party platforms, contributing approximately 350 basis points to comparable sales in the U.S.
- Comparable sales in the U.S. market grew by 4.5%, primarily due to strong growth in health and wellness and groceries.
- Sam's Club same-store sales increased by 6.7%, with transaction volume growing by 4.8%. Membership revenue grew by 9.6%, with robust growth in membership numbers, renewal rates, and Plus members.
- Global advertising revenue grew by 50% (including the newly acquired VIZIO), while Walmart Connect's advertising business in the U.S. grew by 31% (excluding VIZIO).
Walmart maintained its annual sales and profit forecasts for fiscal year 2026. The company continues to expect adjusted earnings per share for the fiscal year ending January 2026 to be between $2.50 and $2.60, with annual sales growth between 3% and 4%. At the same time, it expects consolidated net sales growth in the second quarter to be between 3.5% and 4.5%, higher than the market expectation of 3.46%.
As the largest container cargo importer in the U.S., Walmart's financial report has always been seen as an important window into understanding the health of American consumers and the impact of tariff policy on economic fluctuations. Walmart CEO Doug McMillon stated during the earnings call:
"We will do our best to keep prices low, but given the scale of tariffs, even at the reduced levels announced this week, we cannot absorb all the pressure considering the reality of thin retail margins."
CFO John David Rainey stated in an interview:
"The current retail operating environment is challenging, with prices rising so quickly. There is no historical precedent that compares to such high and rapid price increases. The magnitude of tariff increases is so great that retailers cannot absorb these costs on their own
U.S. Division: Core Market Shows Strong Resilience
As the company's most important market, Walmart's U.S. division performed strongly, with sales reaching $112.2 billion, a year-on-year increase of 3.2%, and comparable sales growth of 4.5%. Notably, the health and wellness and grocery categories performed exceptionally well, driving a 7.0% increase in operating profit to $5.7 billion.
Walmart is better equipped than other retailers to handle various challenges. The company's global supply chain allows it to source products from multiple regions, and its scale means it can negotiate better terms with suppliers.
As a synonym for low prices, Walmart typically performs well during economic downturns, as people tend to seek bargains. Its digital operations also provide an advantage. The retailer is attracting more customers through its pickup and delivery services, drawing in more high-income shoppers for groceries, cold medicine, and baby products.
Walmart's international business generated $29.8 billion in sales, growing 7.8% at constant currency, but operating profit fell 17.5% to $1.26 billion. This decline was primarily due to the company's strategic growth investments in Flipkart, Walmex, and the Canadian market.
Challenges and Outlook: Prospects Amid Economic Uncertainty
In addition to its traditional retail business, Walmart is accelerating the development of high-margin digital businesses, including advertising, membership services, and e-commerce platforms. These businesses not only grow rapidly but also have profit margins far exceeding those of traditional retail.
Analysis indicates that U.S. consumer confidence declined for the fourth consecutive month in April, suggesting cautious consumer spending; meanwhile, U.S. GDP contracted in the first quarter for the first time in three years, raising concerns about a recession. In this environment, Walmart's positioning as a seller of essentials and groceries at everyday low prices provides a competitive advantage but also keeps its profit margins at lower levels.
CFO John David Rainey emphasized that given the dynamic nature of the current economic environment and the overly broad range of short-term outcome forecasts, the company has chosen not to provide specific guidance for operating profit growth and EPS for the second quarter, but expects net sales to grow by 3.5%-4.5% in the second quarter
