BREAKINGVIEWS-Walmart can discount tariffs only so much

By Jennifer Saba

NEW YORK, May 15 (Reuters Breakingviews) - Walmart WMT.N wheeled its trolley cart right into President Donald Trump’s ankles. The largest U.S. retailer and a bellwether for consumers said on Thursday that tariffs would force it to raise prices, just a month after it expressed confidence that it would keep them low. Boss Doug McMillon may be able to do both at once, on a relative basis, but it also sends a clear signal to the White House that shelves are stocked with only so many ways to shield shoppers.

Flagship U.S. Walmart locations open for at least a year generated 4.5% sales growth for the three months ending April 30 from the same stretch in 2024, a second consecutive quarterly slowdown. McMillon warned that import levies are starting to take a toll. Supply-chain pressure began in late April and accelerated in May. The $750 billion company is trying to hold the line on food even as the cost of bananas, coffee, avocados and flowers increases, but it is unwilling to eat them everywhere.

McMillon and his deputies took a markedly different tone a few weeks ago. The CEO told investors that U.S. duties, which at the time were 145% on Chinese goods, remained a question mark, but that Walmart would focus on “managing our inventory and our expenses well.” Following news that those levies would be slashed to 30%, at least temporarily, McMillon cautioned of a challenging environment, implying that he can squeeze suppliers only so much.

He's not alone either. JPMorgan boss Jamie Dimon warned on Thursday that recession remains a threat despite Trump’s trade truce. Taiwanese contract manufacturing giant Foxconn, which assembles iPhones and makes Nvidia servers, also slashed its full-year outlook this week, blaming the stronger Taiwan dollar and “rapid changes” in U.S. tariff policy.

Equity investors took comfort from the lower duty rates, pushing the S&P 500 Index up 5% this week, to higher than where it started the year. Business leaders are clearly less impressed. Sustained gloom from industry titans like Walmart will keep pressure on the president to reconsider his own pricing power.

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CONTEXT NEWS

Walmart said on May 15 that it will have to raise prices due to the impact of tariffs, after indicating in April that it planned to keep prices low.

The retailer reported that first-quarter sales at its flagship U.S. stores open for at least year were up 4.5% from a year earlier. Overall net profit declined 12% to $4.5 billion on a 2.5% increase in revenue.

Walmart did not provide a forecast for second-quarter earnings because of the “dynamic nature of the backdrop.”