Walmart Faces Tariff Headwinds Amid Conservative Outlook
Walmart (WMT) shareholders' concerns over looming tariffs and a conservative outlook are overshadowing the company's recent profit beat.
CFO John David Rainey maintains that Walmart is not immune to tariffs but will leverage its supply chain and private brands to mitigate price increases for customers. Two-thirds of Walmart's annual product expenses are US-sourced, limiting import exposure compared to peers.
The Trump administration has imposed a 10% tariff on Chinese imports, and a 25% tariff on Mexican and Canadian goods is pending. Rainey states that Walmart has not raised prices yet but may pass on cost increases to consumers.
Conservative 2026 fiscal year guidance reflects uncertainty surrounding tariffs and the macroeconomic environment. Rainey emphasizes that the company's guidance does not assume tariff impacts.
Tariffs may impact deflationary trends in general merchandise, with items like electronics and microwaves heavily sourced from China. However, Walmart's scale and ability to negotiate with suppliers and manufacturers may help it maintain margins amid tariff increases.
Analysts believe Walmart's low prices and strong private label program will enable it to absorb tariff-related hikes. Jefferies analyst Corey Tarlowe notes that Great Value brand products are significantly cheaper than name-brand competitors.
However, Rainey notes a shift in consumer behavior in Mexico, where Walmart has a significant presence. The prospect of tariffs has affected sentiment, driving shoppers towards informal markets over formal retail stores.