Walmart, the world's largest retailer, reported its quarterly financial results on Thursday, revealing a complex picture of both challenges and achievements. The company narrowly missed analysts' expectations for quarterly sales, a result of increased pressure from higher tariffs. However, Walmart exceeded earnings projections for the quarter and maintained its full-year forecast, projecting sales growth between 3% and 4%, alongside adjusted earnings of $2.50 to $2.60 per share for the fiscal year. Despite these positive aspects, Wall Street remained unimpressed, leading to a more than 4% drop in Walmart shares during morning trading. A significant achievement for Walmart this quarter was its first profitable quarter for its e-commerce division, both within the U.S. and globally. This success was attributed to the growth of higher-margin ventures, including online advertising and Walmart's third-party marketplace. Chief Financial Officer John David Rainey spoke to CNBC about the ongoing impact of tariffs, noting that even with a recently announced agreement to reduce duties on Chinese imports to 30% for 90 days, tariffs remain "still too high." Rainey emphasized that the scale of these increases is beyond what any retailer or supplier can absorb, indicating that consumers may soon face higher prices, particularly towards the end of the month and into June. Looking ahead, Walmart expects net sales to rise by 3.5% to 4.5% for the fiscal second quarter. However, the company did not provide specific guidance on earnings per share or operating income growth due to the unpredictable nature of U.S. tariff policy. For the three-month period ending May 2, Walmart reported a net income of $4.49 billion, or 56 cents per share, down from $5.10 billion, or 63 cents per share, in the same quarter the previous year. Revenue increased by approximately 2.5% from $161.51 billion a year ago, although it included a 1% headwind due to the leap day in the prior year, marking Walmart's first quarterly revenue miss since February 2020. Walmart's U.S. comparable sales, a key industry metric also known as same-store sales, rose by 4.5%, while Sam's Club saw a 6.7% increase, excluding fuel. E-commerce sales continued their upward trajectory, with a 21% increase in the U.S., marking the 12th consecutive quarter of double-digit growth. Globally, e-commerce sales climbed 22% year over year. Due to its extensive store network and diverse customer base, Walmart is often viewed as a barometer for the U.S. consumer's health. Rainey noted that consumer behavior has not undergone significant changes, despite concerns about potential price increases. Shoppers remain discerning and value-focused, largely maintaining their purchasing habits. Walmart experienced a "choppy" sales quarter, with February's results falling short of expectations, March aligning more closely with forecasts, and April showing a strong performance. As of May, sales patterns seem to mirror those of April. The average customer spend increased by 2.8% year over year, while customer transactions rose by 1.6% in the U.S. Despite growth in purchases across Walmart's stores and online platforms, this marked the fourth consecutive quarter of deceleration for this metric. Tariffs continue to pose a significant challenge for Walmart and the retail industry as a whole, creating uncertainty around inventory orders and tariff levels. Rainey highlighted that approximately one-third of Walmart's U.S. sales come from international markets, with China, Mexico, Canada, Vietnam, and India being the largest sources of imports. CEO Doug McMillon underscored that tariffs on Chinese imports, particularly in categories like toys and electronics, exert the greatest cost pressure. Walmart remains committed to keeping food prices low, but tariffs on countries like Costa Rica, Peru, and Colombia have impacted prices for products such as bananas, avocados, coffee, and roses. In response to these challenges, Walmart is collaborating with vendors to mitigate price increases, though Rainey acknowledged the unprecedented speed and scale of these changes. Walmart plans to maintain its competitive edge by absorbing some tariff-related costs and keeping its price gaps below those of competitors. While the company has not canceled any orders, it has scaled back on certain purchases, particularly items expected to sell less due to higher tariff-related prices. This quarterly report from Walmart comes ahead of updates from other major retailers like Target, Home Depot