Walmart has warned that US tariffs are pushing up its costs, putting pressure on profit margins even as more customers flock to its stores in search of value.
About a third of the retailer’s merchandise comes from tariff-hit countries including China, Mexico, Vietnam, and India, and replenishing inventory at higher post-tariff prices is now weighing on its bottom line.
CEO Doug McMillon said the company has tried to hold prices steady despite the rising cost of goods, but acknowledged that weekly expenses are increasing and will likely continue rising into the third and fourth quarters.
While Walmart raised its annual sales forecast after a strong Q2 performance, it missed profit expectations, sending its stock down 4.5%, its sharpest one-day fall in over four months. Operating profit fell 8.2% to $7.3 billion, dragged by insurance claims, litigation, and restructuring costs.
Despite these challenges, Walmart’s US same-store sales rose 4.6%, with strong performance in grocery and health products. E-commerce sales jumped 25% as the retailer continues to compete with Amazon.
Executives noted that inflation continues to drive shoppers, particularly those in higher income brackets, to Walmart’s low-price offering.
However, McMillon said middle- and lower-income households are making more noticeable changes to their spending habits, especially in discretionary categories like clothing and electronics where tariffs have pushed prices higher.
Walmart’s results come as investors look for clues about the inflationary impact of tariffs ahead of Fed Chair Jerome Powell’s speech at Jackson Hole. While President Trump insists tariffs won’t fuel inflation, Walmart’s quarterly results suggest a more complex reality for retailers and consumers alike.
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