Retail behemoth Walmart (NYSE: WMT) missed Wall Street’s revenue expectations in Q1 CY2025 as sales rose 2.5% year on year to $165.6 billion. Its non-GAAP EPS of $0.61 per share was 5.7% above analysts’ consensus estimates.
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Walmart (WMT) Q1 CY2025 Highlights:
- Operating Margin: 4.3%, in line with the same quarter last year
- Locations: 10,784 at quarter end, up from 10,607 in the same quarter last year
- Same-Store Sales rose 4.8% year on year, in line with the same quarter last year
- Market Capitalization: $778 billion
StockStory’s Take
Walmart’s first quarter results were shaped by ongoing investments in eCommerce, supply chain efficiency, and diversification of income streams beyond traditional retail. Management credited the achievement of enterprise-wide eCommerce profitability—both globally and in the U.S.—to years of infrastructure investment, improved delivery density, and accelerated customer adoption of digital channels. CEO Doug McMillon highlighted, “Delivery speed continues to help drive our business,” noting a 91% increase in sub-three-hour deliveries in the U.S. The company also pointed to strong growth in higher-margin businesses such as advertising and membership income, which, according to CFO John David Rainey, now contribute a quarter of profits. While softness in general merchandise persisted, categories like grocery and health and wellness posted solid gains, reflecting evolving consumer priorities toward necessities and value.
Looking forward, management’s outlook centers on navigating significant cost pressures from recently imposed tariffs, especially on goods imported from China. Walmart’s leadership emphasized flexibility in inventory and pricing strategies, with McMillon stating, “We’re positioned to manage the cost pressure from tariffs as well or better than anyone.” Rainey cautioned, however, that persistent elevated tariffs could produce notable swings in margins and quarterly earnings, making short-term forecasting challenging. The company remains committed to growing profit faster than sales by leveraging its omnichannel capabilities, further scaling its advertising and membership businesses, and continuing investment in automation and supply chain enhancements. Management noted that any shifts in trade policy or consumer demand elasticity could materially affect near-term results, but reiterated confidence in achieving full-year profitability targets.
Key Insights from Management’s Remarks
Management pointed to diversified profit drivers and operational discipline as reasons for margin expansion, even as revenue fell short of Wall Street expectations.
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eCommerce profitability milestone: Walmart’s global eCommerce business reached profitability for the first time. This was attributed to greater delivery network density, customers’ willingness to pay for faster delivery, and continued investment in fulfillment infrastructure. John David Rainey, CFO, noted that densification—delivering to more households per route—lowered unit costs and improved margins.
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Membership and advertising growth: Higher-margin businesses such as advertising and membership income were highlighted as key contributors to profit growth. Advertising revenue grew 50% globally, including contributions from the VIZIO acquisition, while membership income rose nearly 15%. Sam’s Club and Walmart+ both saw double-digit membership gains, signaling customer engagement with digital and loyalty offerings.
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Tariff-related cost management: The company described ongoing efforts to mitigate the impact of higher tariffs through a mix of strategies: shifting production, optimizing product assortments, and absorbing certain costs within categories. Leadership stressed the importance of agility in inventory planning and supplier collaboration to navigate the uncertain trade environment.
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Consumer behavior shifts: Management observed continued pressure on discretionary spending, with consumers prioritizing groceries and essentials over general merchandise. Despite deflation in general merchandise, unit growth was reported in key categories such as toys and apparel, suggesting successful assortment adjustments and promotional activity.
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International market progress: Walmart’s international segment delivered 7.8% constant-currency sales growth, led by strength in China and India. eCommerce and marketplace businesses in these regions expanded rapidly, supported by new seller additions and the rollout of digital advertising solutions.
Drivers of Future Performance
Walmart’s forward guidance is driven by its ability to balance margin preservation with continued investment, amid external risks from tariffs and evolving consumer trends.
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Tariff impact and pricing flexibility: Management flagged that the persistence and size of import tariffs—especially on Chinese goods—could create wide swings in margins and earnings, depending on trade negotiations and consumer price sensitivity. The company is prepared to adjust inventory levels and pricing dynamically to mitigate risk.
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Scaling high-margin businesses: Continued expansion of advertising, membership programs, and marketplace services is expected to support margin growth. Leadership sees these areas as critical levers to offset pressures from low-margin retail categories and external cost headwinds.
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Automation and supply chain investment: Ongoing investments in supply chain automation, fulfillment center upgrades, and digital tools aim to improve efficiency, reduce costs, and enhance customer experience. Management believes these initiatives will drive long-term operating leverage, even as near-term costs fluctuate with external factors.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) how Walmart manages inventory and pricing in response to ongoing tariff volatility, (2) the margin trajectory of its eCommerce and advertising businesses following the profitability milestone, and (3) the pace of international and marketplace expansion. Progress on automation investments and the ability to absorb or offset external cost pressures will also be important indicators of execution.
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