Walmart warns of price hikes amid rising tariff costs: 'given the magnitude of the tariffs, we aren't able to absorb…'

Walmart has said it will raise prices later this month because of higher tariffs, even though its U.S. sales in the first quarter were better than expected. According to a Reuters report, John David Rainey, Walmart’s Chief Financial Officer, told CNBC that shoppers will start seeing price increases by the end of May and into June.

In a statement, CEO Doug McMillon said “We will do our best to keep our prices as low as possible but given the magnitude of the tariffs, even at the reduced levels announced this week, we aren't able to absorb all the pressure given the reality of narrow retail margins”.

What analysts say
According to analysts, the retail giant can work with suppliers and improve efficiency to limit price increases, but only for so long. The Reuters report quotes Brian Jacobsen, chief economist at Annex Wealth Management, who said tariffs will likely reduce demand somewhat but won’t cause a total market collapse.

“There will likely be some demand destruction from tariffs, a complete wreck is unlikely,” he said.

Joseph Feldman, an analyst at Telsey Advisory Group, said Walmart’s wide range of products gives it more flexibility to spread out price increases, which may be easier for customers to accept.

"My sense is Walmart will manage (tariffs) better than almost every other retailer, and they will be able to continue to generate solid profit," Feldman said.

Jacobsen said it made sense for Walmart to hold back on second-quarter profit guidance but found it positive that they maintained their full-year outlook, expecting tariff effects to balance out over time.

Amazon CEO Andy Jassy on Trump’s tariffs
Amazon anticipates minimal impact from US tariffs on Chinese goods. In comments during a call with analysts following the release of Amazon's strong first-quarter earnings results, Jassy explained that the tariffs on goods from China would negatively impact the US-based sellers.

“Retailers who aren’t buying directly from China are typically buying from companies who themselves are buying from China, marking these items up, rebranding and selling to US consumers,” Jassy told analysts on a call.

However, he suggested that the complex global supply chain could inadvertently give Chinese sellers an advantage on the e-commerce platform.

“These retailers are buying the product at a higher price than Chinese sellers selling directly to US consumers in our marketplace. So, the total tariff will be higher for these retailers than for China direct sellers,” he added.