Walmart says higher tariffs on China goods will increase prices for US shoppers

Walmart says higher tariffs on China goods will increase prices for US shoppers

U.S. retailer Walmart Inc on Thursday reported an estimate-beating jump in first-quarter U.S. comparable sales, but overall revenue growth and online sales slowed.

FILE PHOTO: Walmart's logo is seen outside one of the stores in Chicago
FILE PHOTO: Walmart's logo is seen outside one of the stores in Chicago, Illinois, U.S., November 20, 2018. REUTERS/Kamil Krzaczynski/File Photo

REUTERS: Walmart Inc said on Thursday that prices for shoppers will go up due to higher tariffs on imports from China as the world's largest retailer reported its best comparable sales growth for the first quarter in nine years.

Walmart shares, which have gained 7per cent so far this year, rose 2.4per cent to US$102.30 in premarket trade.

U.S. President Donald Trump increased tariffs on US$200 billion worth of Chinese imports to 25per cent from 10per cent last week. The move is widely expected to raise prices on thousands of products including clothing, furniture and electronics. China retaliated on Monday, though on a smaller scale.

Walmart Chief Financial Officer Brett Biggs told Reuters that higher tariffs will result in increased prices for consumers. He said the company will seek to ease the pain, in part by trying to obtain products from different countries and by working with suppliers' "costs structures to manage higher tariffs."

Moody's analyst Charlie O'Shea said the potential impact on Walmart and its shoppers (from tariffs) is limited by its food business. Its grocery operation, which includes fresh food, contributes roughly 56 percent to overall revenue.

"We believe Walmart has the wherewithal both financially and via its vendor relationships to minimize the impact on both itself and its shopping base," he said.

CFO Biggs said the retailer has not seen signs of a slowdown in consumer spending, but he declined to comment on the health of the consumer in the near term.

Investors and analysts expect U.S. spending to slow this year against a backdrop of rising debt, tariffs and economic uncertainty.

U.S. retail sales unexpectedly fell in April as households cut back on purchases of vehicles and a range of other goods, reflecting a slowdown in economic growth after a temporary boost from exports and inventories in the first quarter.

Earlier this week, Walmart stepped up its battle with Amazon.com Inc by offering one-day delivery in some markets without a shipping fee, weeks after Amazon announced a similar plan. Walmart said it will cost the company less than two-day shipping since orders will be delivered from warehouses closer to the customer and arrive in a single box rather than multiple packages.

Sales at Walmart's U.S. stores open at least a year rose 3.4per cent, excluding fuel, in the quarter ended April 30. Analysts estimated growth of 3.1per cent, according to IBES data from Refinitiv.

Adjusted earnings per share increased to US$1.13 per share, beating expectations of US$1.02 per share.

Online sales rose 37per cent, slowing from the previous quarter's 43per cent increase but stronger than online sales growth at most of its brick-and-mortar rivals. The company has forecast a 35per cent increase in online sales this year.

Total revenue was up 1per cent at US$123.9 billion but lower than analysts' estimates of US$125.03 billion dragged down by currency impact and lower international sales. Excluding currency, revenue was up 2.5per cent at US$125.8 billion.

On Tuesday, Walmart said it was considering a stock market listing for its British supermarket arm Asda, whose attempt to combine with rival J Sainsbury Plc was blocked by UK regulators last month.

(Reporting by Nandita Bose in Washington; Editing by Jeffrey Benkoe)

Source: Reuters

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