Despite strong but slipping quarterly sales, Walmart has told investors that it will have to raise prices in response to the company’s tariff policies.

The retailer said that its first quarter profit slipped, earning 56 cents a share or about $4.45 billion. Last year during the first quarter, the company earned 63 cents a share or $5.10 billion, The Associated Press reported.

Adjusted earnings were 61 cents a share, Bloomberg said.

Sales overall were 3% higher, at about $112.2 billion in the quarter ending in April, The New York Times reported.

Toys, automotive items and kids’ clothing were the hot sellers, as were health and wellness items and groceries. Home and sporting goods items were the weakest sellers, the company said, according to the AP.

It hopes to grow sales 3.5% to 4.5% for the second quarter.

Walmart said it has some protections from the tariffs, which were threatened to be 145% on goods imported from China, but was reduced to 30% and some higher tariffs were paused, as announced this week.

The company said two-thirds of products come from the U.S., most of which are groceries.

“The company has scale, strong relationships with vendors, strong relationships with consumers. That will help them,” David Silverman, a retail analyst at Fitch Ratings, said, according to the Times. “That being said, they’re a significant importer.”

Walmart, however, said it cannot absorb the costs of the tariffs, and would have to raise prices to offset the additional cost. Last month, the company had intended to keep prices low, Bloomberg reported.

“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,” CEO Doug McMillon said in a statement on Thursday.

CFO John David Rainey said of the price increases, “If you’ve not already seen it, it will happen in May and then it will become more pronounced,” Bloomberg reported.

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