Walmart, Factoring in List 4 Tariff Impact, Slightly Lowers 2019 Net Sales Target

Though Walmart expects to finish 2019 toward the “upper end” of its previous guidance of between 2.5 percent and 3 percent same-store sales growth, it’s slightly scaling back full-year expectations on consolidated net sales growth, it said in a fiscal Q2 report Aug. 15. It was the first bellwether of possible retail impact from the 10 percent List 4 Section 301 tariffs taking effect Sept. 1, and again Dec. 15, on Chinese goods.

Walmart’s updated guidance “reflects our current understanding of the timing of tariff implementation on various categories as List 4 affects a larger part of our assortment than the prior tariffs,” CEO Doug McMillon said. Walmart previously projected 2019 consolidated net sales growth of “at least” 3 percent but now thinks growth will top out at 3 percent, it said. It left unchanged its 3 percent same-store sales growth forecast at Sam’s Club and still projects 35 percent growth in U.S. e-commerce sales.

“We’re continuing to monitor the ongoing tariff discussions and are hopeful that an overarching long-term agreement can be reached” with the Chinese, McMillon said. “Our merchants continue to execute appropriate mitigation strategies as our goal is to be the low-price leader. Over the past several months, the team has been able to thoughtfully manage pricing and margins with both our customers and shareholders in mind.”

Walmart is reviewing the List 4 “tariff information” that the Office of the U.S. Trade Representative released Aug. 13, McMillon said. The retailer's possible role in helping shape Trump administration tariff policy came into focus in May when Treasury Secretary Steven Mnuchin told a House hearing he speaks “on a regular basis” with Walmart Chief Financial Officer Brett Biggs about how the then-proposed List 4 duties might affect customers (see 1905160079).

The heads of Consumer Technology Association and the National Retail Federation went on Fox Business News in separate segments Aug. 14 to seize upon Trump’s statement as his admission that it’s not the Chinese who pay the tariffs, but U.S. businesses and consumers. “The president listened,” CTA President Gary Shapiro said. “He realized that he was wrong about the fact that tariffs are actually taxes on consumers, and he’s acknowledged that it’s going to affect the holiday season.”

The Dec. 15 deferral was “not a great big gift to anybody,” Shapiro said. The administration’s tariff’s policy “is sowing the seeds of consumer confusion,” he said. “It’s creating business uncertainty. It’s going to keep consumers out of retail. There is great concern in our industry and in other industries about where this is heading.”

NRF is “certainly very pleased to see the administration recognize that there is an impact on consumers, and so they’ve backed off on some of these tariffs that were due to go into effect,” CEO Matthew Shay said. “We remain concerned that there’s plenty of tariffs that remain in effect, and more going into effect on September 1.”

The List 4 tariffs involve “all consumer goods,” Shay said. “The administration avoided those goods from the beginning for a reason, because they know it’s going to drive costs up for consumers. That’s why they made them fourth. If they go there now, they know what’s going to happen and they admitted as much.”