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Home / Business / Walmart's revenue beats all concerns about tariff impact so far by Reuters

Walmart's revenue beats all concerns about tariff impact so far by Reuters



© Reuters. FILE PHOTO: Walmart CEO Doug McMillon, pictured during a discussion in Washington April 11, 2017

By Nandita Bose

WASHINGTON (Reuters) – US retailer Walmart Inc (N 🙂 reported strong Q2 results and raised earnings expectations for the year, while temporarily sparing concerns about consumer demand in the wake of customs duties on imports from China.

Walmart's performance was helped by buyers spending more on its stores and websites, indicating that the US consumer economy has not lost steam and sent its shares up 6.1

% to close at $ 112.69.

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

On Wednesday, Macy's Inc (N 🙂 lowered its annual earnings outlook amid concerns over tariff-related price increases and the resulting impact on demand. On Thursday, JC Penney (N 🙂 posted a 9 percent drop in sales.

Analysts said that the contrast in performance indicates that there are no strong indications of a broad fall in demand in the economy and retailers who have lower growth needs to improve their business strategies.

US retail sales grew in July, which could help calm financial market fears that the economy was heading into a recession.

Consumers respond to the changes the company makes to its business and the company gains market share, CEO Doug McMillon said in a statement. Walmart gained a share in groceries and general commodity categories this quarter, the company said.

The retailer receives 56% of the revenue from food and grocery sales, which means it can manage the pressure from customs better than many competitors, analysts say.

In an interview on Thursday, CFO Brett Biggs said Walmart has raised prices for some goods because of these tariffs, but it doesn't pass all the cost pressures it has on consumers.

It does this by negotiating with suppliers and buying from alternative 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 they want negotiations with China to continue and communicate how this move affects consumers and prices.

"We understand that free trade must also be fair trade," Dan Bartlett, executive vice president for community affairs, told reporters at a conference call.

A Walmart shopping trip was 5.2% more expensive in June than a year earlier, according to Gordon Haskett Research Advisors, who compared prices on a basket of approximately 76 identical items last year.

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

Earlier this week, Trump supported his September 1 deadline to impose 10% tariffs on remaining Chinese imports, and delayed taxes on cell phones, laptops, and other consumer goods to protect US holiday sales.

The trip facilitated retail, but will do little to dampen the impact on the holiday season. Most retailers have bought their goods during the holidays, and the stock has mostly already arrived at US ports and warehouses.

No change in arms sales policy

Walmart has also come under increasing pressure and criticism over its policy of continuing to sell firearms after two mass shootings, one in the store, killed 31 people in Texas and Ohio.

The dealer said that the policy of selling guns has not changed.

It said it has about 2 percent of the firearms market and is not among the top three sellers. It has a 20 percent share of the ammunition market.

"We are encouraged that there is broad support to strengthen background checks and to remove weapons from those determined to pose an imminent danger," said CEO Doug McMillon.

McMillon said that "approval of the assault weapons ban should be discussed to determine the effectiveness of keeping weapons made for war from the hands of mass murderers."

Walmart's Bartlett said it has also made it clear that employees can express their concerns about the sale of weapons and no employee's job was in danger of doing so.

A California junior Walmart employee initiated a petition protesting the sale of firearms totaling more than 50,000 signatures. His access to Walmart's email and messaging systems was temporarily blocked.

Sales in US stores opened at least one year rose 2.8%, excluding fuel, in the quarter ended July 31. Analysts estimated growth of 2.07%, according to IBES data from Refinitive.

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

The trader raised its forecast for adjusted earnings per share to a "small decline to small increase," from a "decline with a low single digit percentage range." This forecast includes the effect of the acquisition of the Indian e-commerce company Flipkart.

Online sales increased by 37%, in line with the previous quarter's increase and higher than the company's expectations of 35%.

Walmart's expansion online has cost its profitability and losses in the US e-commerce business could increase to around $ 1.7 billion this year from $ 1.4 billion in 2018, according to estimates by Morgan Stanley ( NYSE :).

Walmart is looking to sell ModCloth, the women's clothing site it bought two years ago, as it looks for ways to share losses on its online business.

Total revenues rose 1.8% to $ 130.4 billion, beating analysts' estimates for $ 130.1 billion.


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