Walmart US eCommerce Sales Jump 21%; McMillon Cites 3 Tariff-Proof Factors

Walmart’s strengthening position in eCommerce can help blunt at least some of the impact from tariffs and gives some room to offset cost pressures from its supply chain, management told analysts on Thursday during the fiscal first-quarter conference call.

Price hikes are in the offing, over the near term, but the impact to results, and the magnitude of those hikes are unknown.

Still, Walmart is cautiously optimistic on the current operating environment, where scale and a significant U.S. supplier base can help weather macro shocks. Membership rosters are growing too, adding to repeat business.

But a slowdown is apparent in the fact that first-quarter revenues were up by 2.5% to $165.6 billion, slower than the 3% to 4% range for the quarter projected by the company during its annual investor day last month.

Looking ahead, the company sees sales up in the current quarter by 3.5% to 4.5%, with no attendant earnings guidance: CFO John David Rainey noted in the company’s earnings release that estimating forward earnings would be “difficult” given the “dynamic nature of the backdrop.” Full fiscal year sales guidance was maintained at 4%.

Strength in eCommerce, Transactions and Basket Sizes

Drilling down into the company’s earnings supplementals, Walmart said that sales were driven by health and wellness and grocery categories. Comparable store sales gathered 4.5%, as transactions were ahead by 1.6%, and the average ticket size gained 2.8%.

The company’s eCommerce sales were up 21% as store-fulfilled pickup and delivery purchases grew by double-digit percentages and there was 31% growth in Walmart Connect advertising.  Membership related income was 3.8% higher, with double-digit growth in Walmart+ fees.

During the conference call with analysts, CEO Doug McMillon said that each segment delivered eCommerce growth of at least 20%.

“Delivery speed continues to help drive our business. We’ll soon reach 95 of the population in The US, with delivery options of three hours or less. For Walmart US, the number of deliveries in less than three hours grew by 91% for Q1 versus a year ago,” McMillon said.

Gauging the Impact of Tariffs

“The immediate challenge is, obviously, navigating the impact of tariffs here in the US,” he told analysts. “We will do our best to keep our prices as low as possible. But given the magnitude of the tariffs, even at the reduced levels announced this week, we aren’t able to absorb all the pressure given the reality of narrow retail margins.”

He noted on the call that more than two-thirds of what’s sold at Walmart is sourced in the U.S., but “all of the tariffs create cost pressure for us … the larger tariffs on China have the biggest impact. The cost pressure from all the tariff impacted markets started in late April, and it accelerated in May … In some cases, we’ll absorb costs within a category or department, and not simply pass on a tariff cost attributable to each item individually. We’ll be managing mix across items, categories, and businesses.”

Later in the call, he said, “as we continue to diversify our profit streams through our eCommerce offering, our marketplace, and membership, and advertising, we have some room to absorb costs. We’re committed to growing profit faster than sales.”

CFO Rainey said on the call that within the U.S., eCommerce sales were up 21%, but there had been some softening in categories such as electronics and sporting goods. Sam’s Club U.S. comp sales, excluding fuel, increased nearly 7% with strong growth in transactions. Rainey said eCommerce sales in the segment grew by 27%, “led by triple digit growth in Club-fulfilled delivery and double digit growth in pickup.” In further evidence of digital shifts in omnichannel commerce, he noted that “Scan and Go” shopping was up with penetration growing 6% year over year.

“Over 50% of our members now transact digitally in some form with Sam’s, online, or using digital solutions in Club” brick-and-mortar settings, said Rainey.

As for the margins tied to digital sales, said the CFO, “We achieved eCommerce profitability both in the U.S. as well as for the global enterprise in Q1 for the first time, an important milestone for our company. In The U.S., eCommerce net delivery costs have declined as we’ve continued to densify our last mile deliveries and as customers pay fees for faster delivery.”

Membership counts are growing, said Rainey, and Walmart+ income growth in the U.S. has topped 9.5%.

The guidance that’s in place assumes that trade policy discussions will lead to bilateral agreements, Rainey told analysts.

“The operating environment is highly fluid, and it makes the very near term exceedingly difficult to forecast,” he said, adding that “the level and speed at which tariff impacted prices could go up is more extreme than in normal periods.” During a discussion of accounting principles that could impact how costs might impact the goods sold, Rainey said “the magnitude of these swings, both positive and negative, given the level of additional costs that could be applied to the inventory that we’re purchasing right now, are unprecedented in our business and could result in swings in margin and earnings by quarter.”

The positive impact of eCommerce was touched on by McMillon during the call, as he noted that “we have more customers that are coming to Walmart now and taking advantage of our eCommerce offerings, and we’re able to spread those deliveries over multiple households. So think about the opportunity to deliver a package to five houses on a street versus one house on a street …” while revenues are given momentum due to “the willingness that customers have shown to be able to pay for expedited delivery. And what I mean by that is delivery within one hour or within three hours. We noted in the last quarter that fully a third of our customers are taking advantage of that option, and it shows the relevance of convenience.”

Asked on the call about the consumer spending environment, John Furner, CEO, Walmart US, said that customers are “choiceful and consistent. We continue to see customers prioritizing value and speed of delivery. We have seen growth across all income cohorts in the quarter.”

Shares were down 1.7% in early trading on Thursday.