Walmart (WMT) posted a mixed quarterly print Thursday morning as it navigates President Trump’s tariffs.

Its Q1 revenue jumped 2.5% to $165.6 billion, missing Wall Street expectations of $166.02 billion. Adjusted earnings per share grew 1.7% year over year to $0.61, beating estimates of $0.58. US same-store sales also beat expectations with a 4.5% increase, led by health and wellness, and groceries.

But Walmart stock dropped 5% in early trading as it signaled more pain ahead.

“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,” Walmart CEO Doug McMillon said in the release. He added on the earnings call that tariffs have already led to price increases in April and May.

McMillon said the “reset of costs” will continue throughout the year, adding for an “imported item, you pay the tariff at the time it comes through customs … even if the tariff rate comes down later, the cost has been elevated.”

Robert Ohmes of Bank of America estimates Walmart imports roughly 15% of its US sales from China. Around 60% of the US sales are groceries, which are largely tariff-exempt if they’re produced domestically or in Mexico and Canada.

McMillon said that “tariffs on countries like Costa Rica, Peru, and Colombia are pressuring imported items like bananas, avocados, coffee, and roses.”

He added that the company is trying to “keep food prices as low as possible,” and hopes it can get help from policy changes.

In the quarter, adjusted operating income growth of 2.8% beat its guidance of 0.5% to 2%, though it had walked that range down last month. Prior to Trump’s “Liberation Day” announcement, Walmart had guided to annual adjusted operating profit growth of 3.5% to 5.5% on a Feb. 20 earnings release.

The company expects net sales for the second quarter to increase 3.5% to 4.5%. It did not provide guidance for adjusted earnings or operating income, as “the dynamic nature of the backdrop” makes it “exceedingly wide and difficult to predict,” Rainey said in the release.

For the full year, the company reiterated its conservative 2026 fiscal year guidance. It projects net sales to increase between 3% and 4%, in line with a target of 4% annual sales growth it laid out years ago.

Telsey Advisory Group’s Joe Feldman wrote in a note to clients that the retailer is expected to “weather the pressure better than most.”

Prior to earnings, Walmart stock was up 7.3% year to date and up more than 4% in the last month as investors have sought out safe havens. That’s compared to the S&P 500 (^GSPC) remaining flat year to date and a 30% drop for Target (TGT).

Earnings breakdown

Here’s what Walmart reported for its first quarter results, versus Bloomberg consensus estimates:

Revenue: $165.61 billion, versus $166.02 billion

Adjusted earnings per share: $0.61, versus $0.58

Walmart US same-store sales growth: 4.5%, versus 3.85%

Foot traffic growth: 1.6%, versus 3.05%

Ticket growth: 2.8%, versus 1.20%

E-commerce sales growth: 21%, versus 2.12%

This report could also be a key indicator for other retailers’ results. Target, Home Depot (HD), and Lowe’s (LOW) are all set to report next week.

“Shares are still positioned for outperformance,” Oppenheimer analyst Rupesh Parikh told clients in a note prior to earnings. Walmart has the potential for “continued grocery share gains, increasing contribution from alternative revenue streams, ongoing benefits from Walmart’s e-commerce investments, and an improved international footprint.”

Feldman said the company could benefit from a cautious consumer backdrop as low-income consumers seek value items, while higher-income shoppers look for affordable premium products.

In Q1, Walmart’s e-commerce business achieved its first full quarter of profitability, both in the US and globally. E-commerce sales jumped 22%, compared to expectations of 13.85%.

Inventory will be a key metric to watch going forward, as retailers are expected to stockpile goods during the 90-day pause that drops Chinese tariffs from 145% to 30%. In the quarter, its inventory increased 3.8%, compared to estimates of 3.29%.

Executives called inventory management even more important as it heads “into a tariff-impacted period where cost pressures will impact item pricing and make it more challenging to anticipate demand by item,” Rainey said.

Brooke DiPalma is a senior reporter for Yahoo Finance.