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The retail giant hinted at the increases during a quarterly earnings call on Thursday, May 21. Chief financial officer John David Rainey said that Walmart lost about $175 million in operating income due to increasing fuel costs in the first quarter.
The warning came even as Walmart reported strong first-quarter results. Revenue rose 7.3% to $177.8 billion, while US same-store sales grew 4.1% and total e-commerce sales jumped 26% globally.
Still, Rainey said that rising gasoline and diesel prices are hurting shoppers and Walmart's supply chain.
"These are real impacts to cost of goods sold for us and our suppliers," he said. "If the current elevated cost environment persists, we'd expect somewhat higher retail price inflation in Q2 and the second half of the year."
According to AAA, regular unleaded gas averaged $4.56 per gallon nationwide Thursday, up from $2.98 before the Iran war began on Saturday, Feb. 28. Diesel averaged $5.66 per gallon, about $2 higher than at the start of the war.
Rainey also said customers are changing their habits at Walmart and Sam's Club pumps.
"The number of gallons that customers fill up with when they come to our fuel stations fell below 10 for the first time since 2022," he said. "That's an indication of stress."
Federal data showed consumer prices rose 3.8% in April, the first time inflation outpaced wage growth since 2023.
"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," Rainey told CNBC. "It's something that we're keeping a close eye on, but that expectation is built into our guidance for the second quarter."
The "K-shaped" economy is causing Walmart to see more wealthy customers as lower-income shoppers tighten their budgets.
"We see with our customers that the high-income customer is spending with confidence into many categories, while the lower-income consumer is more budget-conscious and perhaps navigating financial distress," Rainey said.
Walmart hasn't indicated which products could see price hikes as the war lingers. CEO John Furner said the retailer launched more than 7,000 rollbacks during the first quarter and will "continue to operate in an everyday low price strategy."
Walmart's stock fell about 7% as of 2 p.m.
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