Walmart seems poised to win in any environment, regardless of where the spinning Trump administration tariff wheel lands or even how the economy fares.
During the retail giant’s investor meeting Wednesday, executives shrugged off tariffs, saying the company was reiterating its guidance for the current quarter and the full year despite them. Q1 sales have been volatile due to waning consumer confidence, but the company said it still expects sales to grow 3% to 4%, which factors in last year’s extra 100 basis points from leap day. Operating income in the quarter may take a hit because the retailer is committed to keeping prices low even if tariffs or other forces spike costs.
Guidance for sales and operating income growth for the full year remains unchanged, with net sales expected to grow 3% to 4% and operating income to grow 3.5% to 5.5%. Long term, the company expects growth each year to hover around 4% on average, executives said.
More than two-thirds of what Walmart sells in the U.S. is made, grown or assembled domestically, and the last third “comes from all over the world, but China and Mexico are the most significant,” Chief Financial Officer John David Rainey said.
In fact, tariffs present an opportunity, according to Rainey.
“We see opportunities to accelerate share gains and are maintaining flexibility to invest in price as tariffs are applied to incoming goods,” he said.
The retail giant runs some 4,600 stores in the U.S. and plans to add a dozen more this year, Walmart U.S. CEO John Furner told investors. The company is also averaging about 650 store remodels annually.
“Stores are the hubs of our business, and our advantage with omni: not just with pickup and delivery but with auto, pet services … or vaccines in the pharmacy,” he said. “Our stores continue to see strong in-person traffic, even as e-commerce grows.”
But in the past five years, Walmart has grown sales by over $150 billion without expanding its namesake or Sam’s Club footprints that much, thanks to higher store productivity but also to e-commerce, which drove half of the growth, Rainey said.
Online sales are now nearly 20% of sales and in the next five years are expected to continue to spur about half of the retailer's topline growth. The retailer offers next-day, same-day and express delivery that can be as fast as one hour. “We can do this better than anyone else because more than 90% of the U.S. population is within 10 miles of a Walmart store,” Rainey said.
Not only that, but online sales at Walmart U.S., long a brick-and-mortar powerhouse, are expected to turn a profit this year, with e-commerce already in the black in Q1.
“This is a milestone moment for our company, and we expect to see the benefits in margins into future years,” he said. Wells Fargo analysts led by Edward Kelly called it “a milestone investors have been waiting for.”
In a research note Wednesday, those analysts said that Walmart “seems like a winner regardless of the backdrop.”
“We walked away from the meeting thinking [Walmart] looks well positioned for long-term share gain,” they said. “If tariff risk softens and the U.S. avoids a recession, [its] growing moat and accelerating fly wheel supports attractive growth. If the backdrop unravels, [Walmart] isn't immune, but share gains likely accelerate, and it could have much more flexibility than most peers.”
