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|16 May, 2019

Walmart says higher tariffs on China goods will increase prices for U.S. shoppers

U.S. President Donald Trump increased tariffs on $200 billion worth of Chinese imports to 25 percent from 10 percent last week

FILE PHOTO: A sign of Walmart Inc. is seen at its first supermarket in China where smartphones can be used to pay for items that are mostly available in its store on the JD.com online platform, in Shenzhen, Guangdong province, China April 4, 2018. REUTERS/Stringer/File Photo

FILE PHOTO: A sign of Walmart Inc. is seen at its first supermarket in China where smartphones can be used to pay for items that are mostly available in its store on the JD.com online platform, in Shenzhen, Guangdong province, China April 4, 2018. REUTERS/Stringer/File Photo

Stringer/File Photo

Walmart Inc  said on Thursday that prices for shoppers will go up due to higher tariffs on imports from China as the world's largest retailer reported its best comparable sales growth for the first quarter in nine years.

Walmart shares, which have gained 7% so far this year, rose 2.4% to $102.30 in premarket trade.

U.S. President Donald Trump increased tariffs on $200 billion worth of Chinese imports to 25% from 10% last week. The move is widely expected to raise prices on thousands of products including clothing, furniture and electronics. China retaliated on Monday, though on a smaller scale.

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Walmart Chief Financial Officer Brett Biggs told Reuters that higher tariffs will result in increased prices for consumers. He said the company will seek to ease the pain, in part by trying to obtain products from different countries and by working with suppliers' "costs structures to manage higher tariffs."

Moody's analyst Charlie O'Shea said the potential impact on Walmart and its shoppers (from tariffs) is limited by its food business. Its grocery operation, which includes fresh food, contributes roughly 56 percent to overall revenue.

"We believe Walmart has the wherewithal both financially and via its vendor relationships to minimize the impact on both itself and its shopping base," he said.

CFO Biggs said the retailer has not seen signs of a slowdown in consumer spending, but he declined to comment on the health of the consumer in the near term.

Investors and analysts expect U.S. spending to slow this year against a backdrop of rising debt, tariffs and economic uncertainty.

U.S. retail sales unexpectedly fell in April as households cut back on purchases of vehicles and a range of other goods, reflecting a slowdown in economic growth after a temporary boost from exports and inventories in the first quarter. 

Earlier this week, Walmart stepped up its battle with Amazon.com Inc by offering one-day delivery in some markets without a shipping fee, weeks after Amazon announced a similar plan. Walmart said it will cost the company less than two-day shipping since orders will be delivered from warehouses closer to the customer and arrive in a single box rather than multiple packages.

Sales at Walmart's U.S. stores open at least a year rose 3.4%, excluding fuel, in the quarter ended April 30. Analysts estimated growth of 3.1%, according to IBES data from Refinitiv.

Adjusted earnings per share increased to $1.13 per share, beating expectations of $1.02 per share.

Online sales rose 37%, slowing from the previous quarter's 43% increase but stronger than online sales growth at most of its brick-and-mortar rivals. The company has forecast a 35% increase in online sales this year.

Total revenue was up 1% at $123.9 billion but lower than analysts' estimates of $125.03 billion dragged down by currency impact and lower international sales. Excluding currency, revenue was up 2.5% at $125.8 billion.

On Tuesday, Walmart said it was considering a stock market listing for its British supermarket arm Asda, whose attempt to combine with rival J Sainsbury Plc was blocked by UK regulators last month. 

(Reporting by Nandita Bose in Washington; Editing by Jeffrey Benkoe) ((nandita.bose@thomsonreuters.com; +12023545868; Reuters Messaging: nandita.bose.reuters.com@reuters.net))

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