Walmart Braces for Tariff-Related Price Hikes
Walmart, America’s largest retailer, is bracing for increased costs due to tariffs, with CEO Doug McMillon predicting an increase in expenses during the third and fourth quarters. During a recent earnings call, McMillon stated that the company has been striving to keep prices low but expects ongoing cost increases as inventory is replenished at post-tariff price levels.
The current tariffs, ranging from 20% to 30%, are being imposed on electronics imported from China. Electronics sourced from Taiwan and Vietnam, two other major suppliers, also face a 20% tariff. In an effort to mitigate the impact, many vendors have rushed to stock up on goods before the tariffs take effect and diversified their sourcing to other markets. Despite these efforts, Walmart has already had to raise prices in some cases, but consumer spending remains strong, with the retailer generating $120.9 billion in Q2 sales within the U.S., a 4.6% increase year-over-year.
McMillon noted that customer behavior has been consistent and that price rollbacks have been achieved for certain products. He stated that the impact of tariffs has so far been gradual, with any behavioral adjustments by consumers being somewhat muted. However, he added that middle- and lower-income households are showing more signs of adjustment than higher income households.
In relation to price hikes, Walmart shoppers are buying less or opting for alternative items or categories. The retailer’s mention of cost increases comes a day after Sony announced it would raise the price of the PlayStation 5 by $50 in the U.S.
Amazon’s CEO has stated that the company hasn’t yet seen diminishing demand or prices significantly increasing. He also highlighted the diversity of sellers on Amazon’s marketplace, with over two million sellers offering differing strategies for passing on higher costs to consumers. This diversity benefits customers when shopping at Amazon, he added.
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