Walmart Braces for Tariff Impact, Outlook Outweighs Profit Beat
Investors in Walmart (WMT) are grappling with concerns over impending tariffs and a conservative fiscal outlook, overshadowing the company's recent earnings surpass.
"We're not exempt from tariffs, but we typically negotiate with suppliers to mitigate their impact. We can shift supply chains and leverage our private brands to control prices for consumers," said CFO John David Rainey.
Despite lower exposure to imports due to its domestic manufacturing, Walmart imports food from Canada and Mexico, while general merchandise largely originates from China. The company has not raised prices but may pass on increased costs to consumers.
Walmart's conservative 2026 guidance reflects uncertainty surrounding tariffs and macroeconomic factors. However, analyst Michael Baker suggests the retailer's scale enables it to maintain margins.
"Walmart can negotiate with suppliers and manufacturers to mitigate tariff pressures," Baker said.
Rising inflation could drive shoppers to Walmart for affordability, as its private label offerings remain significantly lower-priced than competitors.
However, consumer sentiment in Mexico, where Walmart has a significant presence, has been affected by tariffs. "There's a shift from formal retailers to informal markets due to tariff concerns," Rainey noted.