Walmart says U.S. consumers are under pressure from rising costs

U.S. consumers are struggling with rising costs — and many are heading to Walmart.

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The big-box retailer reported Thursday that its revenue rose 7.3% to $177.8 billion in the first quarter, and same-store U.S. sales grew 4.1%, thanks in part to growth from eCommerce and revenue from membership fees. Higher-income households are leading its gains across categories.

But Walmart’s sales growth was only one part of the financial picture. The company also issued guidance to investors for the current quarter that fell short of expectations.

As the nation’s largest private employer and one of its biggest retailers, Walmart’s quarterly earnings offer a window into how the U.S. economy and consumers are doing. Its report Thursday points to a consumer under pressure.

Higher-income households, many benefiting from stock market gains and higher wage growth, are driving an outsized share of consumer spending. Meanwhile, many on the lower end of the “K” are finding their paychecks can’t keep up with rising costs of food, housing, utilities and child care.

In April, inflation jumped 3.8%, its highest level in nearly three years, as the Iran war drives up prices across the economy, including for gas and airfares. Regular gas averaged $4.56 nationwide on Thursday, far higher than the $2.98 right before the war, according to AAA. Diesel averaged $5.66, up around $2 since the start of the war.

And in April, consumer prices outpaced wage growth for the first time since 2003. The hit to Americans’ wallets could worsen: Economists warn we have yet to feel the full economic effects of the war.

Higher gas prices have hit companies and consumers alike, with Walmart noting fuel costs have partially offset its income gains.

The company anticipates consumers could feel the pinch from rising fuel prices even more moving forward.

“I think higher tax returns muted some of the pressure related to higher fuel prices and as we’re in a period of time right now where those tax refunds are largely not coming in, I think consumers are going to feel more of that pressure from higher fuel prices,” said Walmart chief financial officer John David Rainey in an interview with CNBC. “It’s something that we’re keeping a close eye on.”

Walmart’s earnings come just one day after Target reported that its net sales rose more than 6% over last year, though Target’s shares still fell in trading Wednesday. Target, helmed by a new CEO, is looking to turn around years of faltering sales, with some consumers expressing frustration over what they said were disorganized stores and rollbacks of the company’s diversity, equity and inclusion initiatives.

But in the retail wars, the new king is Amazon, which recently overtook Walmart as the biggest global company by revenue. Walmart has been positioning itself as a tech-forward competitor to Amazon — including through investments in artificial intelligence.

Major companies could stand to benefit big-time from tariff refunds — after the Supreme Court ruled against some of President Donald Trump’s tariffs earlier this year.

Citi analysts estimate Walmart could get more than $10 billion and Target more than $2 billion — with many other retailers expected to get millions.

Walmart, in its earnings report, said its guidance “does not assume any impact from IEEPA tariff refunds.”