NEW YORK (AP) – Walmart has traditionally maintained its status as the nation’s largest retailer by focusing on low prices. However, it is now alerting customers that prices will increase for a range of products, from bananas to car seats.
Executives at the $7,500 billion company informed industry analysts on Thursday that they are striving to absorb the rising costs. President Donald Trump has issued this directive.
Despite these efforts, due to the scale of the situation—one of the most significant since the 1930s—price increases appear unavoidable, and the inflation experienced over the past three years is impacting Walmart’s already budget-conscious customers.
Trump’s previously threatened 145% import tax on Chinese goods has been reduced to 30%, with the deal announced on Monday, resulting in a temporary suspension of many tariffs during a 90-day period.
Walmart executives indicated that these price hikes started appearing on store shelves in late April and intensified this month. However, the larger impacts are expected to be felt in June and July, correlating with the back-to-school shopping season.
“Our system is designed to keep costs low, yet retailers face limits on what they can absorb,” Chief Financial Officer John David Rainey explained to the Associated Press on Thursday following the company’s solid first-quarter sales report.
Rainey highlighted that the price increases affect not only discretionary items such as patio furniture and trendy clothing but also essential goods. For instance, the price of bananas imported from Costa Rica has surged from 50 cents to 54 cents per pound. He also anticipates that car seats sourced from China, currently priced at $350, may soon cost customers an additional $100. Strollers are another product sourced from China, according to Rainey.
With growing uncertainty about the economy, the rise in prices coincides with a trend of reduced consumer spending among Americans.
Government data released on Thursday revealed sluggish sales growth for retailers. Walmart noted that consumers are becoming increasingly cautious and selective in their purchases.
China’s tariffs and other countries pose a threat to the low-cost business model that has driven Walmart’s success.
Retailers and importers have largely halted shipments of new customs duties on shoes, clothing, toys, and other items. Imports have resumed in hopes of avoiding empty shelves this fall due to temporary relief from tariffs. However, retailers operating on thin margins are compelled to raise prices to counteract increased tariff costs as well as higher shipping expenses caused by a surge in demand to transport goods to the U.S.
Rainey explained to the Associated Press that unlike others, Walmart did not suspend shipments from China because they wanted to maintain good relations with their suppliers and ensure consistent inventory flow. The company has implemented strategies to hedge against various tariff risks, with two-thirds of Walmart’s products sourced domestically and groceries making up around 60% of Walmart’s U.S. business.
Nevertheless, Walmart cannot remain entirely insulated from these developments.
CEO Doug McMillon informed analysts that Walmart sources everyday items from numerous countries, although China remains the primary supplier for certain categories, such as electronics and toys.
Tariffs imposed on imports from countries like Costa Rica, Peru, and Colombia have driven up costs for bananas and other food items like avocados, coffee, and roses, company executives stated. Walmart has absorbed some rising costs within the industry but has also shifted certain expenses onto consumers.
To mitigate costs, Walmart is encouraging suppliers to replace certain materials with alternatives where applicable, such as opting for fiberglass instead of aluminum, which has faced tariffs since early March.
“We heavily rely on imports for these types of products,” Rainey mentioned to the Associated Press.
He added that there are certain items that Walmart cannot shift production to the U.S. for or produce domestically.
Walmart reported a profit of $50 billion ($4.45 billion per share) for the quarter ending April 30, compared to the same period last year.
According to FactSet, adjusted earnings per share came to 61 cents, surpassing analysts’ expectations of 58 cents.
Revenues climbed 2.5% to $165.61 billion, although analysts anticipated more modest results.
Walmart’s U.S. comparable sales (from established physical stores and online channels) increased 4.5% in the second quarter, slowing slightly from a 4.6% rise in the previous quarter, and compared to a 5.3% spike in the third quarter of 2024.
Sales were particularly strong for health and wellness products, in addition to food. The company reported weaker performance in areas such as home goods and sports equipment, along with robust sales in automotive supplies and children’s apparel.
Global e-commerce sales experienced a 22% increase, up from 16% in the preceding quarter.
Walmart anticipates sales growth between 3.5% and 4.5% for the second quarter.
However, similar to many U.S. companies, the unpredictable environment did not allow for a quarterly profit outlook. The company has kept its full-year guidance issued in February.
Source: apnews.com