Price increases are coming soon to a Walmart near you.
On Thursday, Walmart CFO John David Rainey warned investors that even the retail giant known for its discounts will have to raise the prices of many items because of tariffs — despite a 90-day reprieve that lowered duties on Chinese imports to 30%. Goods from dozens of other countries face a 10% duty.
“We’re trying to navigate this the best that we can,” he said in a CNBC interview. “But this is a little bit unprecedented in terms of the speed and magnitude in which the price increases are coming.”
He said the company is committed to keeping prices low relative to competitors and will absorb some of the higher tariff costs, but said shoppers will likely see increases toward the end of May and more in June. And he predicted more markups than usual in the fiscal second quarter, which began earlier this month.
As the largest retailer and grocer in the U.S., Walmart offered insight into what shoppers may have to pay more for, and when, at a range of stores and chains around the country. The company on Thursday gave clues about which specific items and departments would be most affected by tariffs.
About a third of what Walmart sells in the U.S. is made, grown or assembled in the country, but it relies on goods brought in from dozens of other nations, especially China, Mexico, Vietnam, India and Canada, CEO Doug McMillon said on the company’s earnings call.
He said tariffs on countries like Costa Rica, Peru and Colombia have put pressure on the price of imported items, including bananas, avocados, coffee and roses. He added that a high volume of merchandise in some categories like toys and electronics comes from China.
McMillon did not specify how much more Walmart customers could ultimately have to pay for those items— and how much of the duties will be absorbed by the company or its vendors.
Yet McMillon said the realities of higher costs began to hit Walmart in April, as it imported items including merchandise for the back-to-school season. Tariffs are paid when items come through customs, so some imports have already been subject to higher duties of 145% or the now lower 30% level, even if tariffs ultimately fall to a lower rate.
“What we’re looking at is upward pressure began in April and placed through the entire year on things that are imported,” he said.
Some brands that Walmart sells have spoken about price increases. Barbie maker Mattel‘s CEO Ynon Kreiz, for example, told CNBC early this month that it would raise prices on some toys in the U.S., but that was prior to the announcement Monday to temporarily reduce the duty on China.
Another brand that Walmart sells, Microsoft, said it increased the recommended selling price for Xbox video game consoles and some controllers.
Walmart also shed light on how retailers and consumer brands are trying to manage inventory and keep their businesses on target as tariff levels swing dramatically. Just days ago, Walmart and other retailers faced a 145% levy on imports from China before the temporary agreement.
Retailers and consumers have contended with trying to guess if and when higher prices will hit. That’s led to early purchases of some big-ticket items, such as cars, but also fueled consumers’ hesitance to spend in other areas. At the same time, companies are trying to predict consumer demand while placing orders for the critical back-to-school and holiday shopping seasons.
McMillon said Walmart has taken other steps to reduce tariff exposure along with price increases. Suppliers have shifted from materials like aluminum, which faces tariffs, to fiberglass. Merchants have gotten creative by switching to other products or places to source merchandise.
Rainey told CNBC that Walmart has cut the size of some orders for items where it expects to have bigger tariff-related price increases, since that will likely cause fewer customers to buy those products.
Yet for Walmart, tariffs haven’t dampened sales expectations for the year — and ironically, could help drive shoppers to its stores and website. The company stuck by its full-year forecast on Thursday, despite just missing Wall Street’s quarterly revenue expectations.
In a CNBC interview with Courtney Reagan on “Squawk on the Street,” Rainey said that consumers seek value when prices are higher, and that could give Walmart a chance to gain market share. He echoed comments that the company made at an investor day in April, when it told analysts that the retailer would keep price gaps with competitors the same — even if that means giving up some profit margin.
“There might be some areas where we want to play offense, where we want to be more aggressive,” Rainey said. “We might absorb some of that impact in short term for the benefit long term.”
Correction: This story has been updated to correct the spelling of Colombia.
