Walmart Retail Investors Stay Cautiously Optimistic Despite Tariff-Driven Price Hike Warnings, Ex-US Head Downplays Worries

Retail sector bellwether Walmart, Inc. (WMT) warned that product prices would increase. Still, the initial reaction from the market and the Stocktwits community underscores expectations that the company will weather the storm without much loss.

Walmart warned that ongoing global tariffs, especially on Chinese imports, are straining margins, which are too slim to absorb the full impact. As such, the retail giant will carefully bump prices while trying to reorganize sourcing to mitigate higher tariff costs.  

After the results were published, Walmart shares were unchanged in extended trading on Thursday. The company refrained from guiding the bottom line for the ongoing quarter and maintained its annual outlook.

On Stocktwits, the retail sentiment climbed a few notches lower but held in the 'extremely bullish' territory.

Users were still making sense of how to read into the numbers.

A few users said that despite plans to raise prices, people will continue to buy groceries, and Walmart's prices would still be competitive.

 One user said the stock could go lower as there were "multiple market factors including tariff/import/export concern," but they are bullish long-term and would buy if the price falls.

Walmart, which posted strong Q1 numbers, noted that 60% of its U.S. suppliers are small businesses, making them more vulnerable.

Tariffs on Costa Rica, Peru, and Colombia are also pushing up prices on items like bananas, coffee, and roses. The U.S. remains Walmart's largest sourcing market.

On the analyst call, executives expressed cautious optimism about trade talks with China but said quarterly price swings could be significant.

Bill Simon, who ran the U.S. operations as CEO from 2010 to 2014, thinks the alarm over price hikes is exaggerated.

"This quarter they (Walmart) grew their gross profit margin in the U.S. business 25 basis points. So, they're expanding their margin. They also reported their general merchandise categories were flattish because they had mid-single digit price deflation,' Simon said in an interview with CNBC.

He added that consumers would be able to handle the price increases, painting an optimistic picture for Walmart's business.

WMT stock is up 6.6% this year.

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