Walmart to Absorb Tariff Hikes to Keep Prices Low
Company Forecasts Net Sales Growing 3% to 4% This Year
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As tariff-spooked shoppers begin pulling back on spending, Walmart Inc. is prepping for a worsening economy by using its massive footprint to keep prices low and hunt for ways to take market share.
On April 9, the world鈥檚 largest retailer said in a statement that it still sees net sales growing 3% to 4% this year. That forecast accounts for tariffs, unlike its previous outlook from February.
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Walmart, which has historically performed well in economic downturns, plans to absorb potential price hikes fueled by President Donald Trump鈥檚 escalating trade war and take a short-term financial hit to keep products affordable. The company widened the range of its outlook for operating income for this quarter, acknowledging that its actions may weigh on the bottom line, but didn鈥檛 provide new guidance.
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鈥淗istory tells us that when we lean into these periods of uncertainty, Walmart emerges on the other side with greater share and a stronger business,鈥 John David Rainey, Walmart鈥檚 chief financial officer, said in the statement.
The company鈥檚 shift in guidance for operating income points to 鈥減ressure points,鈥 D.A. Davidson & Co. analyst Michael Baker wrote April 9 in a research note.
鈥淲almart鈥檚 signal to invest in prices could be a strategy to gain share and grow shares, but could squeeze profit in the near term,鈥 Baker said.
The Trump administration is imposing sweeping tariffs that threaten to increase prices on everything from spirits and apparel to electronics and cars. Trump鈥檚 plans sparked a market selloff over the past week, wiping out trillions of dollars in global equity value and stoking concerns about a recession. The latest country-specific tariffs took effect April 9.
In remarks to Wall Street analysts in Dallas on April 9, Rainey said that the company is observing sales volatility due to weakening consumer sentiment and uncertainty. General merchandise sales were softer in the first quarter, but are now improving, he added.
鈥淲e鈥檙e one week into this new tariff environment, and we鈥檙e still working through what this means for us,鈥 Rainey said.
Earlier April 9, Delta Air Lines Inc. pulled its forecast due to uncertainty surrounding global trade. Delta, the first airline to report earnings this quarter, sowed caution with investors by saying revenue has 鈥渇lat-lined鈥 as confidence dims among consumers and businesses. The carrier plans to update its outlook later in the year as visibility improves.
Walmart is seen as a barometer for consumer sentiment due to its size and exposure to a broad swath of U.S. shoppers. The company previously said it鈥檚 accustomed to tariffs and has a diverse supply chain with about two-thirds of items sourced in the U.S. Executives say they鈥檒l work closely with vendors to keep prices low.
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During the company鈥檚 two-day event in Dallas, they have touted their progress with supply chain efforts. Kicking off the event April 8, Walmart CEO Doug McMillon said the retailer will focus on keeping prices as low as possible.
鈥淚t鈥檚 clearly a fluid environment,鈥 McMillon told analysts and reporters April 8. 鈥淲hile we don鈥檛 know everything that鈥檚 going to happen for us, we do know what our priorities are.鈥
Walmart will also look to manage inventory and expenses, he said, adding that the company has navigated through turbulent periods.
