Despite a truce of trade war between the U.S. and its major trade partners, including China, the Trump administration’s remaining tariffs in effect will likely drive up prices at Walmart as soon as this month, the retail giant’s executives said on an earnings call today (May 15).
“We’re positioned to manage the cost pressure from tariffs as well or better than anyone. But even at the reduced levels, the higher tariffs will result in higher prices,” CEO Doug McMillon told analysts.
Though over two-thirds of Walmart’s products are made, assembled or grown in the U.S., the company still relies heavily on imports from China, Mexico, Vietnam, India and Canada. This week, the U.S. lowered tariffs on Chinese goods from 145 percent to 30 percent for a 90-day period. Even so, the impact will be felt, McMillon said, noting Walmart sources electronics and toys from China.
Tariffs on countries like Costa Rica, Peru and Colombia are also driving up costs for items such as bananas, avocados, coffee and roses. “We’ll do our best to control what we can control in order to keep food prices as low as possible,” McMillon said.
Citing tariff-related uncertainty, Walmart declined to provide operating income or earnings guidance for the current quarter. During the February–April quarter, Walmart’s U.S. sales rose 3.2 percent to $112 billion, while its e-commerce segment turned a profit for the first time with a 22 percent increase. The company slightly missed analyst expectations, reporting $165.6 billion in total revenue—a 2.5 percent year-over-year gain—and a 12 percent drop in net income to $4.49 billion.
Price increases tied to tariffs will likely begin later this month and continue through June, said Walmart CFO John David Rainey in a CNBC interview while welcoming the reduction in China tariffs. “But let me emphasize, we still think that’s too high,” he said.
In some cases, Walmart is prepared to absorb costs. For Mother’s Day, it kept flower prices steady at its Sam’s Club subsidiary despite tariff pressures. The retailer also said suppliers are trying to shift to non-tariffed components, such as replacing aluminum with fiberglass when possible.
Walmart will stay in close contact with suppliers and adjust orders as needed in response to shifting tariffs, McMillon said. But advance planning makes some changes harder to implement. “Where it can get more challenging is we make decisions related to things like Halloween and Christmas farther out,” he said. “How do you make a quantity call, and what tariff number do you use?”