Star Metro - Walmart warns of higher prices due to tariffs

"We will do our best to keep our prices as low as possible but given the magnitude of the tariffs, even at the reduced levels, we aren't able to absorb all the pressure," Chief Executive Doug McMillon said in a conference call with analysts.

Walmart executives welcomed the de-escalation of the US-China trade war announced earlier this week, but said the levies on China remained too high. The tariffs are particularly impactful on items such as electronics and toys.

Additionally, McMillon flagged tariffs on countries like Costa Rica, Peru and Colombia on items such as bananas, avocados, coffee and roses.

"We'll do our best to control what we can control in order to keep food prices as low as possible," McMillon said.

The comments came as Walmart reported profits of $4.5 billion, down 12.1 percent from the year-ago level, but topping analyst expectations. Revenues rose 2.5 percent to $165.6 billion.

The retail giant scored a 4.5 percent rise in first-quarter comparable sales in Walmart's US stores behind another robust performance in groceries.

McMillon said Walmart's scale enables it to absorb tariffs on some items without passing them on to consumers. In some cases, suppliers have shifted to materials without tariffs such as fiberglass instead of aluminum, which has a tariff.

Besides China, Walmart imports heavily to the United States from Mexico, Vietnam, India and Canada. The Trump administration is at various stages of negotiation following the president's sweeping April 2 announcement that affected all US trading partners.

While maintaining its full-year projections, the company did not offer a range on its second-quarter profit outlook, citing uncertainty around US trade policy.

"Given the dynamic nature of the backdrop, and the range of near-term outcomes being exceedingly wide and difficult to predict, we felt it best to hold from providing a specific range of guidance for Q2 operating income growth and earnings per share," Chief Financial Officer John David Rainey said in a presentation.

Neil Saunders, managing director of GlobalData, said Walmart was better positioned than other retailers amid the tariffs because of the importance of grocery, a category "consumers will continue to prioritize spending out of necessity," he said in a note.

"Although the waves caused by tariffs now seem to be calmer, it would be incorrect to assume that the waters are completely safe. There will be a lot of further disruption ahead," Saunders said, adding that Walmart is "one of the sturdiest ships" in retail.

Shares fell 0.7 percent in pre-market trading.

X.Gaboury--SMC