By Sabrina Escobar

Walmart told markets Thursday that the Trump administration's tariffs would lead to price increases. The comments from the world's largest retailer means investors and consumers should brace for higher prices across the board.

Because as Justin McAuliffe, research analyst at Gabelli Funds, notes: "If Walmart is raising prices, it certainly means that other retailers are going to be raising prices as well."

While Walmart CEO Doug McMillon had previously commented that tariffs would be painful for consumers, he had stopped short of confirming that Walmart would join the ranks of other retailers that had already indicated prices were trending higher. He changed his tune on Thursday. The company saw bigger tariff pressures on import costs in late April, which accelerated in May, and will have to increase prices on certain products to protect profit margins.

The Trump administration this week temporarily cut tariffs on imported Chinese goods to 30% from 145%. All imports are subject to a 10% baseline tariff, and certain products from Canada and Mexico have a 25% levy.

"We're positioned to manage the cost pressure from tariffs as well or better than anyone," McMillon said. "But even at the reduced levels, the higher tariffs will result in higher prices."

Indeed, some analysts believed there was a chance Walmart wouldn't raise prices at all to avoid alienating inflation-weary consumers and keep gaining market share. Unlike most of its competitors, Walmart has other high-margin businesses, including advertising and memberships, that give it flexibility to set lower prices at the cost of profits in its core retail business.

But if even those moats aren't enough to insulate Walmart from the tariff threat, other retailers will be even harder-pressed to avoid elevating consumer prices -- which could reignite inflation.

"It shouldn't have been surprising," said Steven Shemesh, an analyst at RBC Capital Markets. "I mean, these tariffs are quite high -- the cost for retailers are going up pretty dramatically and retailers operate on pretty thin margins as it is."

Inflation has cooled in the past few months, rising at an annual pace of 2.3% in April, the lowest pace since 2021, according to the latest consumer price index report. Producer prices cooled to a 2.4% yearly increase last month. Economists and investors expect inflation figures to be more volatile in the months ahead as tariffs work their way through the economy.

Word on Main Street

Walmart is the first big-box retailer to report first-quarter earnings this season, but many smaller companies from across the retail spectrum have already told investors they expect prices will increase in the coming months -- from eyewear, footwear, and apparel, to home improvement, car parts, and luxury goods.

Just don't expect prices to rise all at once. Most companies are raising prices gradually, aware that dramatic hikes could spook consumers.

Tractor Supply Co. executives said the company has already gotten requests from vendors to increase prices and that they expect to see more in the coming weeks. The company, however, plans to be "surgical" about the increases, said CEO Hal Lawton on a call with investors.

"Where we take price, we will be surgical, category by category, SKU by SKU, leveraging our portfolio strategy, always with a top priority being a focus on value perception, but also always with an understanding of margin sustainability," Lawton said.

Warby Parker rolled out a "handful of targeted price increases" in April across some of its lens types and accessories which will result in a low-single digit price increase across its glasses business.

Boot Barn Holdings said some vendors plan to hike prices by between 5% and 6% this summer, meaning Boot Barn will raise retail prices on select items to protect margins. On some products, the company plans to take a small loss by keeping prices unchanged to maintain or gain market share.

The Silver Lining

There is one silver lining for both consumers and economists. Retailers are trying hard to keep food costs -- one of the more volatile components of inflation indexes -- relatively low for now.

Grocers tend to source a good chunk of their merchandise domestically, and what they do import often comes from Mexico and Canada. Currently, many agricultural goods are exempt from tariffs because they are compliant with the USMCA trade agreement.

Nicholas Konat, chief operating officer of Sprouts Farmers Market, said the company was "pretty well protected" from tariffs, and has yet to see any pre-emptive product price increases.

Walmart said on Thursday it was aiming to keep food prices as low as possible, even if import costs for things like electronics and toys squeeze margins further.

"We won't let tariff-related cost pressure on some general merchandise items put pressure on food prices," McMillon said.

He acknowledged, however, that proposed levies on some Latin American countries could increase prices for items such as bananas, avocados, coffee, and roses, echoing comments made by Target CEO Brian Cornell in March.

For now, the grocery cart remains somewhat of a safe harbor. But it won't be long before both consumers and retailers start feeling the pinch.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 15, 2025 15:37 ET (19:37 GMT)

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