Walmart (WMT) is set to report earnings on Thursday before the opening bell amid questions over its pricing strategy in the face of tariffs, and its approach to sales of guns and gun-propaganda T-shirts.
The world’s biggest retailer is expected to report earnings per share of $1.22, a 5% drop, according to the average of analysts polled by Bloomberg. Revenue likely rose 2% to $130.1 billion. UBS analysts predict U.S. same-store sales of 2.5%; Bank of America’s team puts the number at 2.4%.
Walmart said last quarter that it would be raising prices on some items to offset increased costs from tariffs. Investors expect an update on that front after the Trump administration announced that the next round of tariff increases on some goods will be delayed until December.
Michael Lasser of UBS says the trade war will prevent Walmart from raising its guidance.
“Historically, Walmart has updated its guidance with its 2Q results,” he wrote in a note previewing the report. “We believe it would have looked to increase its outlook as recently as two weeks ago. But, the most recent tariff development and the resulting uncertainty lead us to believe there’s just not a great incentive to raise expectations at this point.”
Although the office of the U.S. Trade Representative did delay an increase in tariffs on some electronics and other goods imported from China until Dec. 15, tariffs on other merchandise, including some clothing, will rise on Sept. 1.
“Afraid for our industry, the headline was better than the story,” said Rick Helfenbein, president and CEO of the American Apparel Footwear Association. “Approximately 77% of our products still get hit on Sept. 1.”
These increases could prove challenging for Walmart, whose appeal is built largely on low prices.
Then there’s the thorny issue of guns and gun-related apparel, which has drawn the attention of gun-control activists.
Scott Mushkin, senior retailing and staples analyst at Wolfe Research, says Walmart probably will stick to its decision to continue selling guns, but may address security concerns.
“I think it's something the company is going to need to deal with a little bit more aggressively -- safety measures in the stores to give the public a little bit more comfort,” Mushkin said.
He also thinks that Walmart’s “obsession” with Amazon has proven too costly. He downgraded shares to “underperform” in May. “I think the challenge we have is looking at the losses they're seeing both overseas in their E-commerce operations and here in the US-- upwards of $4 billion, we estimate, and likely to rise,” he told Yahoo Finance’s On the Move.
Walmart’s shares have risen this year but have barely kept pace with the overall market. The stock is up 17%, vs. an 18% gain for the S&P 500. Shares of Target, which is due to report its earnings next Wednesday, are up 30%, and Amazon has rallied 19%.
Julie Hyman is the co-anchor of On the Move on Yahoo Finance.