Walmart warns it will raise prices due to tariffs
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Walmart has been pledging to keep prices as low as possible. Photo: Justin Sullivan/Getty Images
Walmart expects to raise some prices because of the impact of President Trump's tariffs, officials said Thursday.
Why it matters: The world's largest retailer, which had pledged to hold the line on pricing, said it was now too late to avoid higher costs for consumers, even with the China trade deal earlier this week.
- "We will do our best to keep our prices as low as possible," Walmart CEO Doug McMillon said Thursday during the retailer's quarterly earnings call. "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."
Catch up quick: For the next 90 days, the U.S. will slash the tariffs on Chinese goods to 30%, from the 145% levy in effect for the past month. China agreed to cut its rate on U.S. exports to 10% from 125%.
- American retailers, including Walmart, have been growing worried that Trump's trade war and increased volatility will lead to empty shelves, higher prices and store closures as Chinese imports screeched to a halt.
- In an April 21 meeting, McMillon and the CEOs of Target and Home Depot privately warned Trump that his trade policy could trigger massive product shortages and price spikes.
Walmart prices could start increasing by end of May
The big picture: Consumers could see prices increase as soon as the end of May, John David Rainey, Walmart's chief financial officer, said in a CNBC interview Thursday.
- "We're wired for everyday low prices, but the magnitude of these increases is more than any retailer can absorb," Rainey said. "It's more than any supplier can absorb and so I'm concerned that consumer is going to start seeing higher prices.
- "You'll begin to see that, likely towards the tail end of this month, and then certainly much more in June," he said.
State of play: McMillon said Thursday that all tariffs are creating cost pressure but the largest tariffs on China have the biggest impact.
- He said the retailer wants to keep food and consumables prices "as low as we can," noting tariffs on countries like Costa Rica, Peru and Colombia are pressuring imported items like bananas, avocados and coffee.
- "Food prices in the U.S. have gone up in recent years, and our customers have been feeling that all along," McMillon said. "We won't let tariff-related cost pressure on some general merchandise items put pressure on food prices."
What they're saying: "While tariffs are disruptive for Walmart, the business is in a better position than many to weather the storm," GlobalData managing director Neil Saunders said.
- Saunders said it is clear "if prices rise across the retail sector, Walmart will see at least a partial replay of the dynamics of the past few years when inflation drove more shoppers, including those from higher income cohorts, through its doors."
Editor's note: This story was updated with additional information throughout.
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