"We're going to continue to do everything we can to keep prices low", said Brett Biggs, chief financial officer at Walmart, which once again topped the Fortune 500 list in 2019. He said Walmart's merchant teams have been developing strategies to mitigate cost increases and are working with its suppliers to manage prices.
That seems to be the case, but just how much will the increase in prices at Walmart (NYSE:WMT) affect customers?
Around half of Walmart's sales are groceries, which are not expected to see price impacts due to the fact that most are domestically sourced. "A sudden tariff increase with less than a week's notice would severely disrupt USA businesses, especially small companies that have limited resources to mitigate the impact". But now they are saying they'll have to pass on the cost to consumers just like they did when the tariff went up past year on fix parts like inner tubes.
"We believe Walmart has the wherewithal both financially and via its vendor relationships to minimize the impact on both itself and its shopping base", he said. "A lot of that's going to have to be passed on". That will make more Chinese-made goods, including toys, clothes and sneakers, more expensive for American consumers.
Walmart shares, which have gained 7 percent so far this year, and closed up 1.4 per cent at $101.31 on Thursday.
Investors and analysts expect U.S. spending to slow this year against a backdrop of rising debt, tariffs and economic uncertainty.
According to a letter sent to President Donald Trump by retail groups, China supplies 41 percent of apparel sold in the U.S.as well as 72 percent of all footwear and 84 percent of travel goods. Walmart has said the costs for next-day delivery are lower versus two-day service because eligible items will come from a single fulfillment center located closest to the customer.
At the end of the quarter, Walmart has 2,450 stores with grocery pickup in the USA and almost 1,000 locations with delivery. That marked Walmart's fourth-straight quarter of sales growth above 3% at stores open at least a year. Walmart's adjusted EPS of $1.13 beat analysts' estimate of $1.02.
Operating income fell 4.1 per cent to $4.9 billion, in part because of Walmart's purchase of Indian e-commerce startup Flipkart past year.
Earlier this week, Walmart stepped up its online battle with Amazon.com Inc by offering one-day delivery in some markets without a shipping fee, weeks after Amazon announced a similar plan.
Tariffs pose an obstacle for Walmart, one of the strongest retailers in the United States.
Online sales rose 37 percent, slowing from the previous quarter's 43 percent increase but stronger than online sales growth at most of its brick-and-mortar rivals.
Excluding currency, the company said its revenue was up 2.5% to $125.8 billion.
Chief executive Doug McMillon highlighted the strong U.S. figures, which come as the company ramps up programs to allow customers to pick up groceries that are ordered online and provide more direct delivery of goods.
Total revenue edged up 1% to $123.9 billion, missing estimates of $125.3 billion.