Walmart Expects to Raise Pricing to Pass Along Higher Costs of Tariff Hike, Says CFO

Walmart is working with suppliers to manage pricing after the Trump administration hiked Section 301 tariffs to 25 percent last week on $200 billion worth of Chinese goods (see 1905090018), said Chief Financial Officer Brett Biggs on a fiscal Q1 earnings call Thursday. Increased tariffs “will increase prices for customers,” said Biggs. With the administration's threat Monday to impose 25 percent tariffs on Chinese imports not previously dutied in the Section 301 investigation (see 1905140025), Walmart will monitor any upcoming U.S.-China trade talks, and is “hopeful that an agreement can be reached” to avert imposition of the fourth tranche of tariffs, said Biggs. Walmart's goal “is to always be the low-priced leader, and we will actively manage pricing and margins as warranted with our customers and shareholders in mind.” Walmart's supply-chain teams are focused on “executing appropriate mitigation strategies,” including possibly sourcing goods from alternative countries of origin, he said. In Q1, Walmart revenues rose 1 percent vs. a year ago to $123.9 billion, tempered by currency headwinds, the company said. Walmart U.S. Q1 revenues were $80.38 billion. Traffic in U.S. stores, now called transactions, rose 1.1 percent, Walmart said, while Q1 tickets grew 2.3 percent over the year-ago quarter. E-commerce sales were “robust,” at 37 percent growth, and contributed 140 basis points to the U.S. segment’s comp sales increase, said Biggs. From Q1 forward, Walmart is including e-commerce transactions that were previously reported in the “ticket” category as “comp transactions,” Biggs said, encompassing in-store, clubs and e-commerce businesses. CE products weren't referenced among categories highlighted for contributing to Walmart U.S.’ 3.4 percent comparative sales bump in Q1, but toys and “wireless” were highlighted in the company’s earnings presentation. The company also credited momentum in food and consumables, pharmacy sales that benefited from “branded drug inflation,” Easter, home and lawn, and garden sales for its “highest Q1 comp in nine years.” In the quarter, the company announced new goals to support recycling in its private brands packaging in Walmart U.S., Canada and Mexico, as part of broader plastic waste reduction goals, said CEO Doug McMillon. Goals include making private brand packaging 100 percent recyclable, reusable or industrially compostable by 2025, to have 20 percent recycled content in its packaging, and making it easier for customers to recycle by including “customer-friendly” labeling on product packaging; Walmart is challenging branded suppliers to set similar targets, he said.