11:02 AM EST, 11/21/2024 (MT Newswires) -- Walmart ( WMT ) appears better suited than rivals to withstand any tumult stemming from President-elect Donald Trump's promised tariffs after the world's biggest retailer posted strong quarterly earnings and boosted annual guidance, analysts said.

Trump has vowed to levy broad-based tariffs on imports, including 60% on goods coming from China. Walmart ( WMT ) Chief Financial Officer John David Rainey said Tuesday on CNBC that the retailer may have to raise prices on some items should the proposed taxes on imports take effect.

Walmart ( WMT ) may be better positioned than other retailers to take tariffs in stride, largely because two-thirds of the items sold in the US are sourced domestically sourced, Bernstein research analyst Zhihan Ma said in an interview with MT Newswires.

"Walmart ( WMT ) has some exposure, but they're not the most exposed," Ma said. "The reason is that most of the consumable products -- food, beverages, fresh produce -- are sourced domestically."

Consumables account for roughly 75% of the company's net sales mix with the rest falling under discretionary, or general merchandise, the analyst said.

"Overall, compared to other companies with greater discretionary exposure, Walmart ( WMT ) is more diversified," Ma said.

On Wednesday, Walmart ( WMT ) reported fiscal third-quarter adjusted earnings and revenue that topped estimates by analysts. The retail giant boosted full-year guidance for adjusted earnings to a range of $2.42 to $2.47 a share from $2.35 to $2.43 and lifted the net sales growth outlook to a range of 4.8% to 5.1% from 3.75% to 4.75%. Walmart ( WMT ) also expects adjusted operating income to grow by 8.5% to 9.25%, up from the previous forecast of 6.5% to 8%.

In the US, Walmart ( WMT ) booked net sales of $114.9 billion, up from $109.4 billion a year earlier, while comparable sales grew by 5.3%, versus 4.9%. The company continued to increase US market share in both grocery and general merchandise thanks largely to upper-income households with earnings topping $100,000, which accounted for 75% of the share gains, Chief Executive Officer C. Douglas McMillon said Wednesday on an earnings call.

The performance of Walmart's ( WMT ) upper-income demographic continues a trend the company has flagged for several quarters, Karen Short, head of consumer/retail research at Melius Research, said in an interview with MT Newswires.

"They're not specifically targeting one cohort, they're just trying to gain share across the board," Short said. "They have a lot of competitors that are struggling and are not executing particularly well, so it's more a question of momentum that's building."

Though Walmart ( WMT ) hasn't provided specific data on what's driving the trend among upper-income households, anecdotal evidence suggests that the e-commerce division, which posted sales growth of 27% globally and 22% domestically in the quarter, may be responsible, Bernstein's Ma said. For online purchases, a significant portion of orders came from customers choosing expedited delivery of less than one hour or less than three hours, CFO Rainey said on the earnings call.

"That's an additional $10 you're paying for expedited shipment," Ma said. "Intuition would suggest that a lot of those people are probably coming from the higher-income cohort."

The emergence of e-commerce reflects the company's efforts to provide customers with a suite of digital services akin to Amazon.com (AMZN). Walmart+, the membership program that provides in-store and online benefits to shoppers, recorded double-digit growth in membership income in the quarter, Rainey said. Walmart Marketplace, the e-commerce platform that allows third-party sellers to sell products on the retailer's website, posted 42% growth in the US. Walmart's ( WMT ) global advertising business increased 28% in the quarter, including 26% growth by Walmart Connect in the US.

"They're getting traction with all of these alternative revenue streams," Short of Melius Research said. "Those are not being used to fund brick and mortar. Those are just additive to the business. This ship is not changing course. The big just keep getting bigger and better."

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