Walmart rolled through 2024, but uncertainty about consumers and tariffs seep into year ahead

[February 21, 2025]  By ANNE D'INNOCENZIO

NEW YORK (AP) — Walmart delivered another year of strong sales and profits as its competitive prices became a strong magnet for inflation-weary shoppers. Yet uncertainty about the state of the American consumer and the potential impact of tariffs have seeped into expectations for 2025.

The financial outlook from nation's largest retailer, which has thrived amid stubborn inflation, delivered a jolt across the retail sector. Walmart sees per share profit over the next year coming in as much as 27 cents below analyst projections, a notable shift that sent company shares down more than 6% in midday trading.

Its sales outlook was also mild, potentially a reflection of challenges ahead as consumers pull back on spending and President Donald Trump's tariffs on China and other countries threaten the low-price model that is the core of Walmart's success.

During an interview with The Associated Press Thursday, Walmart's Chief Financial Officer John David Rainey said shoppers remain resilient while cautious, but there is no apparent change in behavior related to tariffs.

There is more uncertainty about what lies ahead and Rainey said Walmart's measured guidance reflects that.

“We are one month into the year, and there’s a lot that we don’t know,” Rainey said, citing the new tariff increases.

Walmart did not incorporate tariffs into its financial outlook, but Rainey acknowledged that the company's isn't immune to their impact.

“We're going to work really hard to keep prices low for our members and customers,” Rainey said. “We will do the things that we can."

That means being nimble with sourcing. Walmart, for example, is exploring new sourcing for microwave ovens given increased tariffs on aluminum and steel. But Rainey said some goods may have price increases.

Tariffs in the headlines have fueled concern and some more shopper retrenchment in Walmart’s Mexico business, Rainey said.

Walmart has built in hedges against some tariff threats. Two-thirds of Walmart's merchandise is sourced in the U.S., with groceries driving much of that. Groceries account for roughly 60%, of Walmart's U.S. business.

Still, Walmart shares took a hit, and other big retailers fell, too.

Walmart is among the first major U.S. retailers to report financial results and the numbers can provide a hint as to the mood of the American shopper. Over the past year Americans have focused increasingly on necessities rather than big TVs, furniture or appliances. They've become much more discerning because of higher costs for credit as well as for groceries.

Walmart has flourished in that environment. It's gained market share, notably among households with incomes over $100,000. Walmart’s online offerings and paid membership, Walmart +, have also drawn wealthier customers

A shopper selects a carton of eggs from a display in a Walmart store Friday, Feb. 7, 2025, in Englewood, Colo. (AP Photo/David Zalubowski)

“We have momentum driven by our low prices, a growing assortment, and an eCommerce business driven by faster delivery times,” said CEO Doug McMillon. “We’re gaining market share, our top line is healthy, and we’re in great shape with inventory.”

Still, Walmart could be faced with challenges with the new tariffs carrying more economic risks than during Trump's first term. If Americans are hit by a new wave of price increases, economists say, and with 70% of the U.S. economy driven by consumers a broad pullback in spending would have ramifications beyond Walmart’s sales.

Government data last week revealed a sharp drop in January retail sales as cold weather kept more Americans indoors. But it was a much bigger drop than economists expected and the biggest in a year.

Walmart, based in Bentonville, Arkansas, reported earnings of $5.25 billion, or 65 cents per share, in the quarter ended Jan. 31. That compares with $5.49 billion, or 68 cents per share, in the year-ago period. Adjusted earnings per share for the most recent quarter was 66 cents. Sales rose 4.1% to $180.55 billion in the quarter.

Analysts expected 65 cents per share on sales of $180.07 billion, according to FactSet.

For Walmart’s U.S. division, comparable store sales — which include online and stores open for the past 12 months — rose 4.6% in the U.S., a bit lower than the 5.3% in the previous quarter. The retailer had a 4.2% jump in the U.S. in the second quarter and 3.8% in the first quarter.

Global e-commerce sales rose 16% in the latest quarter, notably slower than the 27% increase in the third quarter.

Walmart expects first quarter earnings per share of between 57 cents and 58 cents, well below the 64 cents Wall Street was expecting, and for the year. Walmart projects earnings per share in the range of $2.50 to $2.60. That’s also off the $2.77 that analysts are predicting, according to FactSet.

It forecast a 3% to 4% increase in quarterly sales or between $166.35 billion and $167.97 billion. That is also a bit light, with analysts expecting sales of $167.05 billion.

Walmart expects annual sales to rise between 3% and 4%, or between $667.57 billion and $674.05 billion. That too falls short of the $708.72 billion that Wall Street projected.

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