Walmart Inc. (WMT) shares plunged 5.04% in pre-market trading on Thursday, despite the retail giant reporting better-than-expected first-quarter earnings, as the company warned of looming price hikes due to tariff pressures.

The world's largest retailer posted adjusted earnings per share of $0.61, surpassing analyst estimates of $0.58. Revenue rose 2.5% year-over-year to $165.6 billion, roughly in line with expectations. U.S. comparable sales grew 4.5%, exceeding forecasts of 3.9%.

However, Walmart's positive results were overshadowed by warnings about the impact of tariffs on its business. CEO Doug McMillon stated on the earnings call, "We will do our best to keep our prices as low as possible but given the magnitude of the tariffs, even at the reduced levels announced this week, we aren't able to absorb all the pressure given the reality of narrow retail margins."

The company maintained its full-year outlook but withheld second-quarter profit guidance, citing uncertainty around tariffs. CFO John David Rainey warned that if higher tariff rates are restored, "the impact on financials could be significant and even jeopardize ability to grow earnings year-over-year."

Walmart said it expects to begin raising prices later this month due to tariff-related cost pressures. While the company pledged to keep food prices as low as possible, it noted that tariffs are impacting costs for imported items like bananas, avocados, coffee, and roses.

The stock's sharp decline reflects investor concerns about the uncertain tariff environment and its potential to erode Walmart's margins, despite the company's strong performance in the first quarter. As the largest U.S. retailer, Walmart's warnings serve as a bellwether for the broader impact of trade tensions on American consumers and businesses.