Walmart to pass on tariff burden to shoppers, braces for margin volatility

Walmart customers could soon see higher prices on store shelves, as the retail giant grapples with rising costs from new and ongoing tariffs.

The company announced Thursday that it will raise prices on some items this month and into early summer, as tariff-related expenses begin to ripple through its supply chain.

“The magnitude and speed at which these prices are coming to us is somewhat unprecedented in history,” Walmart Chief Financial Officer John David Rainey said in an interview. 

He said the retail environment remains dynamic, and that while sales climbed in the latest quarter, the broader consumer impact of tariffs is only beginning to show.

The company’s share price fell by almost 4% on Thursday following the developments.

Walmart earnings: sales growth seen despite inflation worries

Walmart reported a 4.5% increase in US comparable sales for the quarter, surpassing Wall Street expectations.

The growth includes both in-store and digital channels, with the company’s e-commerce business posting a 22% rise globally.

Sales have continued to gain momentum, even as inflationary concerns weigh on consumer sentiment.

This performance comes amid a volatile macroeconomic backdrop.

In March and April, markets fluctuated sharply, and household confidence dipped.

Yet Walmart benefited from continued demand for essentials, particularly groceries and household items, with more affluent households also turning to the retailer for value offerings.

“Our customers are still cautious,” said Rainey, noting that inflation in categories like child care and groceries remains a key concern for shoppers.

Tariffs force price increases, but Walmart holds firm on essentials

Although the US recently lowered tariffs on Chinese imports from 145% to 30%, the effect on retail pricing remains significant.

“Even at a reduced rate, the 30% tariff creates meaningful price increases,” Rainey said.

Walmart has already passed some of these costs on to customers.

The price of bananas, a staple item, has risen from 50 cents to 54 cents per pound.

Other imported goods such as avocados, coffee, and fresh flowers are also under pressure due to food tariffs from countries including Costa Rica, Peru, and Colombia.

Still, Walmart is attempting to cushion the blow.

Chief Executive Doug McMillon said the company will do its best to avoid raising prices on food and consumables, even if general merchandise prices edge up.

“We want to keep our food and consumables prices as low as we can,” he said, noting efforts to limit food waste and manage supplier costs.

Despite the rising input costs, Walmart left its full-year profit and sales forecast unchanged, reflecting confidence in its ability to navigate the environment.

McMillon added that the company may absorb some costs in the short term to stay competitive.

Expect big fluctuations in quarterly margin and earnings: CFO to investors

The retail giant, however, is cautioning investors to expect significant fluctuations in its profit margins and earnings from quarter to quarter, as it contends with sharp and unpredictable changes in inventory costs.

On a call with analysts, Rainey said tariff-related cost increases may lead to higher prices on goods, though any eventual cost declines could force Walmart to apply markdowns to clear excess inventory.

“The magnitude of these swings, both positive and negative, given the level of additional costs that could be applied to the inventory that we’re purchasing right now, are unprecedented in our business,” Rainey says. 

He urged investors to assess the company’s performance by looking at results across the next few quarters as a whole, rather than focusing on short-term shifts.

Rainey added that Walmart is preparing for multiple outcomes as global trade negotiations evolve.

The company believes the most probable result is that bilateral agreements between the US and its trading partners will be reached, bringing tariff rates down from their current levels.

If that scenario plays out, Walmart expects to meet its full-year guidance for both sales and earnings.

However, Rainey warned that if the previously proposed, significantly higher tariffs by President Trump are reinstated, Walmart’s financial results could suffer a substantial blow.

Under that outcome, the retailer’s ability to grow profits this year would be at risk, he said.

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