TipRanks
4 min read
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Walmart’s (WMT) stock and strategic outlook remain steady despite President Trump’s directive for the retailer to “eat the tariffs,” following Walmart’s indication that it may raise prices in response to rising import costs.
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Currently, tariffs include a 30% levy on Chinese goods and a 10% tariff on imports from most other countries—a significant concern for Walmart, given that around 60% of its imports come from China. With operating margins typically in the narrow 4% to 5% range, the company faces difficult trade-offs between absorbing costs or passing them on to consumers, challenging its low-price core value proposition.
Nevertheless, Walmart’s massive scale, strong brand, and strategic agility position it better than most in navigating these pressures, leaving me tentatively optimistic about the stock’s resilience in the face of ongoing trade uncertainty.
Walmart’s latest quarterly results were solid, with revenue reaching $165.6 billion—a 2.5% year-over-year increase—and operating margins holding steady at 4.3%. However, the recent wave of global tariffs has injected uncertainty into the outlook, prompting the company to withdraw its second-quarter operating margin guidance. CFO John David Rainey signaled that price hikes are inevitable.
While Walmart has reduced its reliance on Chinese imports from 80% in 2018 to around 60% today, China still supplies approximately 15% of its total merchandise—particularly in categories like electronics and toys. Starting in May, and escalating in June, Walmart will begin raising prices across most product lines, a move that drew sharp criticism from President Trump.
Meanwhile, Chinese authorities are pushing back against suppliers asked to absorb tariff costs, leaving U.S. retailers like Walmart caught in the middle. Although recent negotiations between the U.S. and China led to a partial rollback of tariffs from previous highs, the current levels still present a significant cost burden, one that even a giant like Walmart is struggling to absorb.
Walmart isn’t alone in navigating the challenges posed by tariffs—retailers like Home Depot (HD) and Target (TGT) are also being forced to adapt. Home Depot has chosen a different path, opting to discontinue certain product lines and diversify its supply chain rather than raise prices. Target, on the other hand, is increasing prices on select items after lowering its sales forecast.
