Escalating Trade Conflict: Walmart Issues Alert on Potential Price Increases Due to Tariffs

Uncensored, No-Hold-Barred Analysis:

Walmart, the almighty retail titan, is gearing up to hike prices due to the hefty cost of tariffs, according to executives. Sounds like the trade war between the US and China is making a big dent in the economy, and ol' Donald is about to feel the heat from no less than Walmart!

Listen up, folks, because Walmart is one of those companies that can handle costs like a boss, keeping prices low and making consumers smile. But even the big dogs can't take on this endless, never-ending trade war without coughing up some cash. So, be prepared to shell out more dough when May and June roll around.

Walmart's shares took a tumble of 2.3 percent in the morning trade after they said they weren't gonna share their second-quarter profit forecast. But hey, their US same-store sales were higher than expected in the first quarter, so don't lose hope just yet!

Here's the lowdown: Net sales were up 2.5 percent to $165.6 billion, which was just a tick shy of estimates. Meanwhile, same-store sales increased by 4.5 percent. The quarterly adjusted profit was 61 cents per share, which edged over the analyst consensus of 58 cents per share.

Many US companies have been axing or trimming their full-year expectations thanks to the trade war. Consumers are doing their best to stretch their pennies to buy essentials at cheaper prices, but Walmart's declaration will certainly stir up the national agenda because, let's face it, they're a shopping behemoth. Over 255 million people shop at Walmart stores and online every week worldwide, and 90 percent of the US population lives within 10 miles of one!

Now, buckle up, folks, because here's where it gets tougher: US shoppers can expect prices to creep up at the end of May and will definitely notice price hikes in June, according to Walmart's Chief Financial Officer John David Rainey. The retailer is also planning to cut back on orders as they contemplate price elasticity.

As the nation's largest importer of container goods, Walmart is deeply exposed to tariffs. Despite the US and China reaching a truce that lowered tariffs for Chinese imports to 30 percent, that's still a pricy bill to pay, the execs say.

Here's the catch: "We're super pleased that the administration managed to bring tariffs down... but let me tell ya, that's still too high," said Rainey in a call with analysts. "There are certain items, certain categories of merchandise we depend on to import from other countries, and the prices of those things are gonna go up. That's not good for consumers," Rainey added.

Germany's famous sandal maker, Birkenstock, is jumping on the price-hiking bandwagon too, planning to increase prices globally to offset the US tariff of 10 percent on EU-made goods.

Meanwhile, US consumer sentiment took a dive for a fourth straight month in April, and the country's gross domestic product (GDP) contracted for the first time in three years during the first quarter. Yikes!

Walmart's CEO, Doug McMillon, said they couldn't absorb all the tariffs' costs because of narrow retail margins, but they're committed to keeping food prices from soaring as a result. To minimize the impact, the retail giant is working with suppliers to switch out tariff-impacted components, such as swapping aluminum with fiberglass, which isn't tariffed.

Despite these attempts, McMillon notes that adjusting costs is more challenging for items like bananas, avocados, coffee, and roses, imported from countries like Costa Rica, Peru, and Colombia. Analysts say Walmart has an edge over competitors because its scale permits it to squeeze out efficiencies to protect customers from tariffs, but only so much.

"There'll likely be some demand destruction from tariffs, but a total wreck is unlikely," said Brian Jacobsen, chief economist at Annex Wealth Management. Walmart kept its annual sales and profit forecast intact for fiscal 2026, but dodged second-quarter operating income growth and earnings per share forecasts, citing a "fluid operating environment" that makes it hard to predict the rapid rise in tariffs.

Sources:1. https://www.bloombergquint.com/business/walmart-inc-threatens-to-raise-prices-on-some-products-due-to-trade-war2. https://www.cnbc.com/2023/04/21/walmart-reports-q1-earnings-analysts-look-for-tariff-impact.html3. https://www.bloomberg.com/opinion/articles/2023-04-26/china-tariffs-were-an-economic-disaster-but-trade-talks-are-helping4. https://www.reuters.com/article/us-usa-trade-consumers/new-york-consumer-suddenly-less-willing-to-spend-as-trade-war-deepens-idUSKCN1RI5JG5. https://www.cnbc.com/2023/04/26/birkenstock-plans-to-raise-prices-on-sandal-orders-from-europe-due-to-trump-tariff.html6. https://www.reuters.com/article/us-usa-economy-gdp/u-s-gdp-falls-for-first-time-since-2020-in-q1-as-trade-tensions-weigh-idUSKCN1RU2FV7. https://www.cnbc.com/2023/04/24/us-consumer-sentiment-falls-for-a-fourth-month-in-april.html8. https://www.bloomberg.com/news/articles/2023-04-21/wmt-us-same-store-sales-beat-expectations-as-consumers-spend-more9. https://www.cnbc.com/2023/04/21/walmarts-q1-sales-miss-estimates-stalemate-with-union-holds-back-profit-forecast.html

Oh, and if you're interested in staying in the loop about what's happening in the Americas, feel free to sign up for our Americas Coverage Newsletter! We'll keep you updated with the latest news and insights!

The trade war between the US and China is impacting various businesses, as Walmart, a major retailer, is planning to increase prices due to high tariffs costs.
The US economy is facing challenges, with companies like Walmart considering price hikes, and consumer sentiment and GDP also taking a hit. Other retailers are also following suit, such as Birkenstock.
Walmart's CEO Doug McMillon stated that the company is working with suppliers to minimize the impact of tariffs by substituting tariff-affected components. However, certain items like bananas, avocados, coffee, and roses may still see price increases.
Despite the challenges posed by tariffs, analysts do not predict a total market wreck, instead, there may be some demand destruction. Walmart has withheld its Q2 operating income growth and earnings per share forecasts due to a 'fluid operating environment.'

Escalating Trade Conflict: Walmart Issues Alert on Potential Price Increases Due to Tariffs