Walmart, the global leader in retailing, is cautioning that tariff costs are increasing at a constant rate and will keep on going up through the remaining part of the year.
CEO Doug McMillon informed investors this week that even though Walmart has tried to negate the impact of tariffs on imported items, the cost impact is growing and increasingly difficult to bear.
“We’ve kept continuing to see our costs go up week by week, which we anticipate will keep doing for a while longer through the third and fourth quarters,” McMillon explained on the company’s latest earnings call. The retailer has moved aggressively to pass on as much of the tariff cost as it can, modifying its pricing strategy and using its size to reduce the blow to shoppers.
Nevertheless, certain price hikes have not been avoidable. Walmart has increased prices on some items while having strategically retained others at lower costs to compete, especially on must-have back-to-school items. McMillon highlighted that Walmart’s top back-to-school offerings were even more affordable this year than they were last year, showing its commitment to keeping essential categories affordable for price-conscious families.
The broader challenge is that tariffs imposed under the Trump administration continue to weigh heavily on retailers. Virtually all imports from China face higher duties, a move initially intended to pressure Chinese manufacturers but one that has instead placed U.S. retailers in a difficult position. Walmart, along with Home Depot, Target, Lowe’s, and others, has had to adapt its pricing, promotions, and inventory strategies to navigate the rising costs.
Incidentally, the phased implementation of tariffs had muted the shock to consumers. According to McMillon, the slower rate of tariff imposition enabled Walmart customers to adapt without extreme adjustments in behavior. “The effect of tariffs has been gradual enough that any customer behavior adjustments have been somewhat muted,” he said. Customers opted for alternatives or abstained from buying in most instances instead of radically changing shopping habits.
In spite of the tariff pressure, Walmart U.S. sales are still robust. The retailer saw domestic sales rise 4.6% in the most recent quarter, a healthy number that indicates consumer strength even in the face of increased expenses. Some of this expansion is credited by analysts to an invasion of higher-income shoppers, who are more and more likely to go to Walmart for bargains as economic uncertainty persists.
The retail sector as a whole has seen divergent results. Home Depot saw a 1.4% lift in U.S. sales for the period ending August 3, marking better performance than earlier this year. Chief executive Ted Decker emphasized that most shoppers are putting off large-scale renovation projects due to general economic uncertainty and not solely because of higher prices. “By a wide margin, economic uncertainty is number one,” said Decker to investors.
Rival Lowe’s echoed similar sentiments, describing tariffs as creating a “dynamic environment” and “uncharted waters” for the industry. Executives admitted that while the company initially aimed to avoid raising prices, the steep jump in tariff rates since the spring has forced some adjustments.
At the same time, TJX Companies, parent company of T.J.Maxx, Marshalls, and HomeGoods, announced it has been accumulating inventory to limit the effect of increased tariffs. The off-price chain reported it bought more merchandise than normal, such that it had robust inventory levels for several months in advance despite cost concerns.
For Walmart, the future strategy will be to balance selectively price hikes with ongoing focus on affordability in core categories. By keeping the basics at competitive prices, the company is looking to retain its status as a value destination, especially for middle- and lower-income consumers who are more price-sensitive.
While tariff pressures continue to be an issue, McMillon sounded an upbeat note, indicating that Walmart’s size, scale, and flexibility provide it with the edge to get through a unpredictable retail environment. The company’s results will continue to be monitored as tariffs continue to be a focal point for retailers through the holiday season and beyond.
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