Walmart’s earnings beat allays worry over tariff impact for now

Walmart’s earnings beat allays worry over tariff impact for now

WASHINGTON (Reuters) – U.S. retailer Walmart Inc (WMT.N) reported an estimate-beating jump in second-quarter U.S. comparable sales on Thursday as shoppers spent more at its stores and websites, sending its shares up 5% in premarket trading.

FILE PHOTO: Walmart signs are displayed inside a Walmart store in Mexico City, Mexico, March 28, 2019. REUTERS/Edgard Garrido/File Photo

Walmart raised its earnings expectations for the year after a 20-quarter, or five-year, streak of U.S. growth, unmatched by any other retailer.

Consumers are responding to the changes the company is making to its business and the company is gaining market share, Chief Executive Doug McMillon said in a statement.

Walmart’s performance temporarily sidesteps concerns around consumer demand in the wake of tariffs on imports from China. The retailer gets 56 percent of its revenue from food and grocery sales, which allows it to manage the pressure from tariffs better than many rivals, analysts said.

In an interview on Thursday, Chief Financial Officer Brett Biggs said Walmart has raised prices on some items due to these tariffs, but it is not passing all the cost pressure it faces to consumers.

It is managing that by negotiating with suppliers and sourcing from alternate supply bases, he said.

“We still feel good about the consumer overall,” Biggs said.

U.S. President Donald Trump raised tariffs on $200 billion of Chinese imports to 25% from 10% earlier this year, a move that has begun pushing up prices of thousands of products including clothing, furniture and electronics.

Earlier this week, Trump backed off his Sept. 1 deadline for imposing 10% tariffs on remaining Chinese imports, delaying duties on cellphones, laptops and other consumer goods, to shield U.S. holiday sales.

The move offered relief to the retail industry but will do little to mitigate the impact on consumers during the holiday season. Most retailers have purchased their holiday-season merchandise, and the inventory has for the most part already arrived at U.S. ports and warehouses.

Walmart has also come under growing pressure and criticism over its policy to continue selling firearms after two mass shootings, one at its store, killed 31 people in Texas and Ohio. The retailer said its policy to sell guns had not changed and did not offer further updates on the issue.  

Sales at U.S. stores open at least a year rose 2.8%, excluding fuel, in the quarter ended July 31. Analysts estimated growth of 2.07%, according to IBES data from Refinitiv.

Adjusted earnings per share increased to $1.27 per share, beating expectations of $1.22 per share.

The retailer raised its forecast for adjusted earnings-per-share to a “slight decrease to slight increase,” from a “decline by a low single-digit percentage range.” That forecast includes the effect from the acquisition of Indian e-commerce firm Flipkart.

Online sales surged 37%, in line with the previous quarter’s increase and higher than the company’s expectation of 35%. That contributed 140 basis points to U.S. comparable sales, from 100 basis points during the same quarter last year.

Total revenue was up 1.8% to $130.4 billion, beating analysts’ estimates for $130.1 billion.

Reporting by Nandita Bose in Washington; Editing by Bernadette Baum and Nick Zieminski

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