Walmart warns tariffs will raise prices for shoppers

Darnell Taylor
May 18, 2019

He said the company will try to ease the pain, in part by working with suppliers' "costs structures to manage higher tariffs". That alert from Walmart contrasts with President Donald Trump's often-repeated assertion that China is paying the price in the ongoing trade war between the world's two largest economies.

The Trump administration made a decision to increase tariffs on $200 billion in Chinese goods last week, with more potential tariff increases to come on items from China that aren't already taxed. "Our goal is to always be the low-price leader, and we will actively manage pricing and margins as warranted with our customers and shareholders in mind".

"We're monitoring the tariff discussions and are hopeful that an agreement can be reached", CFO Brett Biggs said in a statement.

Walmart declined to comment on what type of price hikes shoppers could expect and which products would get the biggest increases. Sales of groceries - Walmart's biggest business - fueled the increase, and a later-than-usual USA flu season boosted health and wellness products.

O'Shea said the effect of tariffs on Walmart would be "limited" because of the extent of its food business and because the company "has the wherewithal both financially and via its vendor relationships to minimise the impact on both itself and its shopping base".

Retailers depend heavily on China in their supply chain.

On a call with reporters, Biggs said tariffs would result in higher prices for shoppers. The consumer is going to have to pay more for a lot of critical goods'.

Walmart shares, which have gained 7 per cent so far this year, closed up 1.4 per cent at US$101.31.

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The world's biggest retailer is echoing a warning recently made by department-store chain Macy's: Prices are headed higher for US shoppers if more tariffs are imposed on imports from China.

Many analysts anticipate the pace of US spending will slow in 2019 amid increasing debt, the imposition of tariffs on consumer goods and general uncertainty about the economy.

Earlier this week, Walmart stepped up its online battle with Amazon.com Inc by offering one-day delivery in some markets without a shipping fee, weeks after Amazon announced a similar plan. It was the chain's best first-quarter comp performance in nine years and its fourth consecutive comp gain over 3%.

In the USA, the largest piece of Walmart's business, operating income grew 5.5 per cent as some transportation costs eased.

Walmart reported its first quarter earnings results, delivering adjusted earnings per share of $1.13, surpassing Wall Street analysts' expectations of $1.02.

Tariffs pose an obstacle for Walmart, one of the strongest retailers in the United States.

Sales at Walmart's U.S. stores open at least a year rose 3.4 per cent, excluding fuel, in the quarter ended April 30. Excluding currency, revenue was up 2.5 per cent at US$125.8 billion. The company also said online sales rose 37%.

Total revenue was up 1 percent at $123.9 billion but lower than analysts' estimates of $125.03 billion, dragged down by the currency impact and lower worldwide sales.

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