Walmart’s Q2 allays worry over tariff impact for now

WASHINGTON, Aug 15, (RTRS): US retailer Walmart Inc reported strong second-quarter results and raised its earnings expectations for the year, temporarily sidestepping concerns around consumer demand in the wake of tariffs on imports from China.

Walmart’s performance was helped by shoppers who spent more at its stores and websites, indicating the US consumer economy has not lost steam, sending its shares up 4.6% in early trading.

The world’s largest retailer posted a 20-quarter, or five-year, streak of US growth, unmatched by any other retail chain.

On Wednesday, Macy’s Inc lowered its annual earnings outlook amid worries over tariff-related price hikes and the resultant impact on demand. On Thursday, JC Penney posted a 9-percent drop in sales.

Analysts said the contrast in performance indicates there is no evidence to suggest a broad drop in demand in the economy and retailers posting lower growth need to improve their business strategies.

US retail sales surged in July, which could help to assuage financial markets’ fears that the economy was heading into recession.

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 gained share in grocery and general merchandise categories this quarter, the company said.

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.

The company said it has expressed to the Trump administration that it wants negotiations with China to continue and communicated how this move impacts consumer and prices.

“We understand that free trade also has to be fair trade,” Dan Bartlett, executive vice president of corporate affairs, told reporters on a conference call.

A Walmart shopping trip was 5.2% more expensive in June compared with a year earlier, according to Gordon Haskett Research Advisors, which compared prices on a basket of about 76 identical items over the past year.