Walmart CFO: 'Increased tariffs will lead to increased prices for our customers'

Cashiers ring up shoppers at a Walmart Inc. store in Burbank California U.S.
Credit
Patrick T. Fallon  Bloomberg

Cashiers ring up shoppers at a Walmart Inc. store in Burbank California U.S. Credit Patrick T. Fallon Bloomberg

But executives joined a chorus of retailers who have warned about tariffs in the wake of the Trump administration's latest moves in the long-running US-China dispute. "However, increased tariffs will lead to increased prices for our customers", he said. "It's who we are", chief financial officer Brett Biggs said on a conference call with reporters. The company may also strike up deals with suppliers to try and reduce the price increase.

The comments came after the nation's largest retailer reported its best sale performance at its established USA namesake stores for the fiscal first quarter in nine years.

Walmart (WMT), the world's largest retailer, reported better-than-expected earnings during the first quarter, driven by strength in its USA e-commerce business.

We expect higher comparable sales, productivity savings, and a lower outstanding share count to support Costco (COST) and Target's (TGT) bottom-line growth. Other companies, including sporting goods, auto parts and furniture sellers, have even greater exposure to China.

President Donald Trump has started a process to impose new duties on about $300 billion worth of additional Chinese merchandise that cover virtually everything China sells to the United States and encompass household items such as clothing and appliances. That mostly impacted industrial materials, but things like luggage, hats and gloves were also affected.

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In addition, the US has started a formal process that will levy new tariffs on the remaining exports coming from China that aren't already taxed. That will make more Chinese-made goods, including toys, clothes and sneakers, more expensive for American consumers.

Retailers depend heavily on China in their supply chain.

The world's biggest retailer is echoing a warning recently made by department-store chain Macy's: Prices are headed higher for US shoppers if more tariffs are imposed on imports from China.

Other companies are beginning to feel pressure to raise prices due to the Chinese trade war.

Tariffs pose an obstacle for Walmart, one of the strongest retailers in the United States.

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Sales at Walmart's US stores open at least a year rose 3.4 percent, excluding fuel, in the quarter ended April 30. That marked Walmart's fourth-straight quarter of sales growth above 3% at stores open at least a year.

"The US business continues to benefit from a healthy economic environment", CFO Biggs said in a statement earlier Thursday.

Online sales rose 37%, slowing from the previous quarter's 43% increase but was better than online sales growth at most of its brick-and-mortar rivals. Walmart has ramped up its online grocery business and acquired trendy fashion brands such as Bonobos and Eloquii.

Chief executive Doug McMillon highlighted the strong USA 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.

Operating income fell 4.1 per cent to US$4.9 billion, in part because of Walmart's purchase of Indian e-commerce start-up Flipkart a year ago.

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Retail expert Bruce Winder said that if Walmart is considering increasing the prices of their products, other stores will likely follow. "We believe that some of this is down to the fact shoppers are now becoming more price sensitive, which plays into one of Walmart's core strengths".

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