Dive Brief:
- Walmart's 7.3% year-over-year increase in U.S. sales — the strongest in more than 10 years, CFO Brett Biggs noted in a statement — offered an optimistic outlook in a quarter marked by trade uncertainty and potential pressure from increasingly strenuous e-commerce delivery speeds.
- In May, Biggs warned tariffs on consumer goods would lead to price increases on the shelf, but the company statement indicates other mitigation strategies are working just fine for now.
- According to analysts, retailers in general, and Walmart in particular, are unlikely to make major pricing changes despite tariffs.
Dive Insight:
Despite looming list four tariffs coming in September and December, Walmart has actually lowered some U.S. prices, said Biggs. UBS analyst Michael Lasser estimates 26% of Walmart's products originate in China, and list four encompasses many consumer categories like apparel, footwear and electronics, many of which were pushed to the later December effective date.
But Walmart has more than enough volume in its supply chain to keep consumers insulated from most tariffs, Moody's Vice President Charles O'Shea told Supply Chain Dive.
"Most of the large retailers that had the financial capabilities and the savvy have been diversifying for years," he said.
Walmart, O'Shea said, will always have product within any given category that won't be impacted by a given disruption, tariffs included. Plus, Walmart's private label products offer another level of price control.
"What Walmart will be able to to do is they’d get the vendors to share the pain. That's just part of the game of dealing with Walmart. Walmart expects you to help them be the low-cost provider," said O'Shea.
Though Walmart could raise some prices eventually, he continued, it would likely be the last of the retailers to do so, with Amazon the only close competitor in terms of buying power.
"I would strongly suggest that no one is going to beat these guys on price — nobody can. Even in a tariffed environment," he added.
A research note from UBS on apparel and footwear pricing dated Aug. 15 confirms Walmart is not alone in its reticence to raise prices. The report predicts any retail price increase would be met in the market with a comparable sales volume decrease. UBS said a 10% price increase is necessary to mitigate a 10% tariff, but retailers are unlikely to do so. The analysts suggest tariff-affected retailers without Walmart's buying power will raise prices slightly, but eventually take a hit on profitability.
