Walmart's earnings: Navigating the trade war

A key driver of Walmart’s growth was the company’s web division. Consumers are buying more groceries online, and Walmart’s US online sales jumped 37 percent. [Daniel Becerril/Reuters]

Walmart Stores Inc. was a major gainer in the Dow Jones Industrial Average Thursday after it posted better-than-expected results at its United States division during the first quarter. The largest retailer in the US hinted at the possible impact of the US-China trade dispute and showed how it is capitalizing on its brick-and-mortar locations to compete with its top online rival, Amazon.

Walmart stores are located within 10 miles of 90 percent of the US population – a footprint that helps the company quickly fulfill online orders.

On the potential impact of the US-China trade war, Walmart CFO Brett Biggs said his company is monitoring the tariff discussions and hopes both sides can reach an agreement. “We will actively manage pricing and margins as warranted,” Biggs said, adding that Walmart has been eyeing the situation for months to devise “appropriate mitigation strategies”. He didn’t elaborate, but reportedly told financial news network CNBC that “tariffs will increase” prices for shoppers.

The administration of US President Donald Trump is considering levying a 25 percent tariff on an additional $300bn worth of Chinese imports. Analysts say higher tariffs will put pressure on US retailers. In a report released this month, UBS analyst Jay Sole said the potential tariff could hurt US apparel retailers to the point where “major store closures” become a real possibility.

Two-thirds of merchandise made by Walmart’s US division is manufactuered, assembled, sourced or grown domestically, the company has said.

“Walmart has the wherewithal both financially and via its vendor relationships to minimize the impact,” writes Moody’s analyst Charlie O’Shea.

Walmart’s US division accounts for about two-thirds of the company’s business. At both

Read More Here...

Bookmark the permalink.