Updated 4:05 p.m. ET April 9
Faced with a flood of tariffs from U.S. President Donald Trump’s trade war, Walmart Inc. was able to put on a brave face on its business for the year ahead and held on to its annual forecast.
“It’s a very fluid situation,” Doug McMillon, president and chief executive officer, at the retailer’s a previously scheduled meeting in Dallas on Wednesday morning.
“We can control some things,” McMillon said. “We’re going to focus on what we can control. We’re going to do our best to keep prices as low as we can. Inventory management is always important, but becomes even more important in this environment.”
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That was enough to calm some investor nerves early on, and the stock shot up 9.8 percent to $89.77 even though Trump ratcheted up the pressure on China while delaying or reducing new tariffs for most countries.
The tariffs on China — which went from 104 percent to 125 percent on — are still an acute problem for Walmart, which gets a third of its U.S. inventory from abroad, with China and Mexico counting as its largest sourcing markets. But it’s a world away from Trump’s previous stance, which, for instance, also added 46 percent tariffs on Vietnam.
With revenues of $681 billion last year, 270 million customers visiting its stores each week, Walmart is both highly exposed to the tariffs and big and strong enough to maneuver.
“We have the benefit of mixed management,” McMillon said. “It’s great to be in a business where we sell fresh produce and we sell apparel and we sell hard lines.”
Even in the face of steep new tariffs on imports on goods from around the world, the CEO stood strong.
“I want you to know how confident I remain in our company,” he said. “I’ve seen us navigate times like the period after 9/11, the global financial crisis, the pandemic and, more recently, high inflation. While in the short term, we’re not immune to some of the effects. We are positioned to play offense. Nothing about the current environment impacts our confidence in our business or strategy.”
At its last investor meeting two years ago, Walmart said its updated business model — leaning more on e-commerce, an omnichannel positioning and new business like digital advertising — would deliver sales growth of about 4 percent, with operating profit growth outpacing sales.
John David Rainey, chief financial officer, reminded investors that since then sales have grown by more than 5 percent and operating income has increased almost 10 percent.
“While the market may be a little nervous about consumer sentiment at this very moment, there’s nothing, nothing that changes our view on our ability to deliver this framework in the coming years,” Rainey said.
Walmart’s version of omnichannel has helped it add more than $150 billion in sales over the past five years without a meaningful increase to its store base.
“We’re getting more out of our stores and clubs than before, and e-comm has contributed 50 percent of that growth,” Rainey said. “We’ve set off this virtuous cycle, investing in the business to drive above-trendline growth, higher incremental margins, which in turn allows us to reinvest back into the business and generate improved financial returns for shareholders. This cycle results in ROI continuing to improve into the future.
“We are truly and uniquely a scaled omnichannel retailer,” he said. “We are one of one.”
And to drive that point home, Rainey revealed that Walmart’s U.S. e-commerce business is trending toward profitability in the current quarter and is expected to be profitable on an annual basis.
“This is a milestone moment for our company and we expect to see the benefits and margins in the future years,” he said.
On almost any other day, that might have been the headline, but Trump’s tariffs dominated the retail and Wall Street conversation Wednesday morning.
At a time when companies were poring over every news alert and closely watching the body language from Trump, it was reassuring that Walmart was able to put such a brave face on the situation.
“We’re one week into this new tariff environment and we’re still working through what this means for us,” Rainey said. “As a reminder, though, more than two thirds of what we sell in the U.S. is made, grown or assembled in the U.S.
“We want to keep prices low,” he said. “Our team is experienced with managing price over a portfolio of items. We want to manage our inventory well and we want to manage our cost.”
There were recent reports that Walmart was trying to get its suppliers on the back end to bear at least some of the cost of the increases.
Meanwhile, Walmart is confronting an increasingly skittish shopper on the front end of its business.
“For 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,” Rainey said. “But we still expect [first-quarter] sales to be in the range of guidance of 3 percent to 4 percent growth. Operating income has been harder to predict and we’ve widened our internal range of scenarios.”
Walmart also stood by its sales and operating income growth guidance for the year.
Even so, it’s only April and there is still a trade war going with China and time to hope that the smoke clears before annual numbers are due.