Get ready for some sticker shock at the low-price leader.
Weeks ago, Walmart was said to be pressuring its suppliers to keep their costs down, so it wouldn’t have to pass along tariff-related cost increases to its customers.
Now, Walmart says price increases are inevitable – and imminent.
“The higher tariffs will result in higher prices,” Walmart CEO Doug McMillon warned this morning. “We will do our best to keep our prices as low as possible 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.”
“We will absorb some of the price increases and suppliers will too,” Chief Financial Officer John David Rainey told CNBC. “But consumers are likely to see some price increases and that concerns us.” He expects some prices will begin to rise by the end of the month.
Walmart didn’t single out any specific products or categories where prices might change first, or most dramatically. Retail analysts expect categories like electronics and toys will be hit first and hardest, since many of them are imported from overseas.
But groceries account for the majority of Walmart’s business. And they’re not immune to price hikes, either. “We import about a third of our overall merchandise and food that we sell in the U.S.,” Rainey said. Bananas, for example, are one of the most frequently purchased items at Walmart, and the vast majority of them are imported. Tariffs have driven up their price, Rainey told the Wall Street Journal, from 50 to 54 cents a pound – and shoppers are already seeing those higher prices in stores.
That said, “we won’t let tariff-related cost pressure on some general merchandise items put pressure on food prices,” McMillon pledged. So if wholesale costs go up on certain nonfood items, Walmart expects to keep price increases contained to those specific items instead of spreading those increases around the store.
Walmart is among the first retailers to acknowledge the impact that tariffs are having on its ability to keep prices down. And retail analysts believe its size and broad range of products will allow Walmart to withstand price pressures better than most. So if Walmart is a true bellwether for the retail industry, and it’s already acknowledging that price increases are coming, that doesn’t necessarily bode well for other retailers’ ability to keep their own prices down.
Walmart’s warning comes after it actually had a pretty good quarter. But that was largely due to shoppers stocking up before the impact of tariffs fully took hold. Since then, “we’re pleased with the progress that the administration has made to reduce tariffs,” Rainey said. “But they’re still high.”
It’s not all bad news, as Walmart took the opportunity to highlight the “5,000+ pricing rollbacks across our assortment.” And it pointed to strong sales in the health & wellness and grocery categories, as shoppers of all income levels seek out lower prices on everyday necessities.
But there’s no denying that plenty of uncertainty lies ahead. “The magnitude and speed at which these prices are coming to us is somewhat unprecedented in history,” Rainey told the Wall Street Journal.
So if you haven’t done your pre-tariff stock-up shopping trip yet, you may have just a few weeks more to do it. If Walmart is warning of higher prices, it may be only a matter of time before others do, too.
Image source: Walmart
