Walmart: Tariffs and Conservative Outlook Weigh on Stock
Walmart (WMT) investors are facing concerns amid looming tariffs and the company's conservative outlook, overshadowing recent profit gains.
"We're not immune to tariffs, but we work closely with suppliers and shift supply as needed," said CFO John David Rainey. He emphasized the company's efforts to leverage private brands and cost-saving measures.
Walmart highlights its significant domestic production, with two-thirds of its spending occurring in the US. Beyond the US, Rainey acknowledged the dependence on China for general merchandise.
The Trump administration's additional 10% tariff on Chinese imports and pending 25% tariff on Mexico and Canada have raised concerns. Rainey indicated that price increases may be passed along to consumers if costs escalate.
Despite conservative 2026 fiscal year guidance, Walmart shares dropped over 6% after the announcement. Rainey attributed this to uncertainty surrounding tariffs.
Tariffs may impact categories like electronics and microwaves, which rely on Chinese imports. However, Walmart's scale may provide an advantage in mitigating these impacts.
Analysts believe Walmart's ability to negotiate with suppliers and its lower-priced private labels could provide a competitive advantage.
However, the company faces challenges in Mexico, where consumer sentiment has been affected by tariff concerns. Rainey noted a shift towards informal markets from retail stores.