Breaking News
Investing Pro 0
Cyber Monday Extended SALE: Up to 60% OFF InvestingPro+ CLAIM OFFER

Walmart says higher China tariffs will increase prices for U.S. shoppers

Stock Markets May 16, 2019 08:22PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Shoppers at a Walmart store in Chicago Illinois
 
AMZN
-1.43%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
WMT
-0.10%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
JSAIY
+1.81%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Nandita Bose

(Reuters) - Walmart (NYSE:WMT) Inc said on Thursday that prices for shoppers will rise due to higher tariffs on goods from China as the world's largest retailer reported its best comparable sales growth for the first quarter in nine years.

Bentonville, Arkansas-based Walmart called out the impact of tariffs on consumers after Macy's Inc delivered a similar warning on Wednesday. The department store chain's Chief Executive Jeff Gennette said tariffs on Chinese imports are hitting its furniture business and warned investors that additional levies would leave its clothing and accessory categories vulnerable.

U.S. President Donald Trump increased tariffs on $200 billion worth of Chinese imports to 25% from 10% last week. The move is widely expected to raise prices on thousands of products including clothing, furniture and electronics. China retaliated on Monday, though on a smaller scale.

Walmart Chief Financial Officer Brett Biggs said in an interview that higher tariffs will result in increased prices for consumers. He said the company will seek to ease the pain, in part by trying to obtain products from different countries and working with suppliers' "costs structures to manage higher tariffs."

Moody's analyst Charlie O'Shea said the potential impact on Walmart and its shoppers from tariffs is limited by its food business. Its grocery operation, which includes fresh food, contributes roughly 56 percent to overall revenue.

"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.

Walmart U.S. Chief Executive Officer Greg Foran said on a conference call the company will maintain its "low-price leadership" and "manage costs on an item-by-item basis." But that position has been threatened, in part, by rising competition from discount chains like Aldi.

Also, Walmart's vendors have started to raise prices, among them Del Monte Foods, which supplies fresh and packaged goods to Walmart, including mandarin oranges imported from China. Prices will go up again with tariffs rising.

"It’s not just tariffs. Transportation costs are up, labor costs are up. It’s an inflationary environment," Del Monte CEO Greg Longstreet told Reuters on the sidelines of a conference. "A lot of that's going to have to be passed on. The consumer is going to have to pay more for a lot of critical goods."

Walmart shares, which have gained 7% so far this year, closed up 1.4% at $101.31.

NO SIGNS OF SPENDING SLOWDOWN

Walmart CFO Biggs said the retailer has not seen signs of a slowdown in consumer spending.

Investors and analysts expect U.S. spending to slow this year against a backdrop of rising debt, tariffs and economic uncertainty.

U.S. retail sales unexpectedly fell in April as households cut back on purchases of vehicles and a range of other goods, reflecting a slowdown in economic growth after a temporary boost from exports and inventories in the first quarter.

Earlier this week, Walmart stepped up its online battle with Amazon.com Inc (NASDAQ:AMZN) by offering one-day delivery in some markets without a shipping fee, weeks after Amazon announced a similar plan.

Walmart said it will cost the company less than for two-day shipping since orders will come straight from warehouses closer to the customer and arrive in a single box rather than multiple packages.

Sales at Walmart's U.S. stores open at least a year rose 3.4%, excluding fuel, in the quarter ended April 30. Analysts estimated growth of 3.1%, according to IBES data from Refinitiv.

Walmart has recorded over four straight years of sales growth, unmatched by any retailer.

Adjusted earnings per share increased to $1.13 per share, beating expectations of $1.02 per share.

But profits remained under pressure as more revenue was generated by lower-margin online sales and as e-commerce investments rose.

Operating income fell 4.1% to $4.9 billion, in part because of Walmart's purchase of Indian e-commerce startup Flipkart last year.

In the United States, the largest piece of Walmart’s business, operating income grew 5.5% as some transportation costs eased.

Online sales rose 37%, slowing from the previous quarter's 43% increase but stronger than online sales growth at most of its brick-and-mortar rivals. The company has forecast a 35% increase in online sales this year.

Total revenue was up 1% at $123.9 billion but lower than analysts' estimates of $125.03 billion, dragged down by the currency impact and lower international sales. Excluding currency, revenue was up 2.5% at $125.8 billion.

On Tuesday, Walmart said it was considering a stock market listing for its British supermarket arm Asda, whose attempt to combine with rival J Sainsbury (OTC:JSAIY) Plc was blocked by UK regulators last month.

Walmart says higher China tariffs will increase prices for U.S. shoppers
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (9)
Jon PN
Jon PN May 17, 2019 12:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Buying at Walmart is NOT the only option for American consumers, who for the most part are weary of Chinese imports.
nguyen dang
nguyen dang May 16, 2019 6:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Why don't we increase the sales tax. it less painful and more sensible..
Gary Gee
TheGman May 16, 2019 6:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
sales taxes don't target china
Al Vlaj
alvlaj May 16, 2019 6:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Neither do tariffs actually.
nguyen dang
nguyen dang May 16, 2019 6:15PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
My Apple phone just went up $250 more...
Gary Gee
TheGman May 16, 2019 6:15PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
not necessarily, the manufacturing cost paid vs the retail price is different. I could be wrong, but the tarif is applied to the invoice based on the product being imported. So an iphone may only cost $200 to build and manufacture. however once in the us, the retailer can charge what they want. Autos would take a bigger hit, which is why they're holding off. markup is maybe 6%
Frank Taylor
Frank Taylor May 16, 2019 2:08PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
US companies that are not buying from US manufacturing may now have incentive to source from countries with reciprocal trade policies.
Olivus Olive
Olivus Olive May 16, 2019 1:44PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Chinese goods will become less competitive meaning lower sales with more sales going to good made elsewhere. So I don't see tariffs raising prices more than a few percent max.
Jon PN
Jon PN May 16, 2019 1:44PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Well said! There will be a massive stock pile of Chinese goods because we have other choices.
LI SH
LI SH May 16, 2019 11:26AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
That’s a smart retailor, already making changes to it’s supply chain.
David Bowie
Defcon2 May 16, 2019 9:47AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Walmart admitted that they are already looking at ways to avoid price hikes. I bet they will find a way to do just that, and higher prices for consumers will be avoided.
Thomas DeVito
Thomas DeVito May 16, 2019 9:24AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
it will also likely increase the nominal profits since they are based on a percentage of price. The us consumer has a massive amount of surplus. this will just increase what a visit spends per visit which could translate to more profits and better wages if played right. Prices that are too low are not good. It leads to waste and shrinking margins.
Dima Bedin
Dima Bedin May 16, 2019 8:34AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Trump doesnt shop in Wallmart lol
Stu Warneski
Stu Warneski May 16, 2019 8:34AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Maybe not, but the majority of his supporters do, and they will feel the pain of higher prices
DGaia Castillo
DGaia Castillo May 16, 2019 8:34AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
And the earth is flat, right!
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email