Tariffs Are Raising Walmart's Costs, but It is Trying to Avoid Price Increases - for Now

Walmart Inc.’s stock fell in early trading Thursday after the retail giant missed Wall Street’s profit expectations for its fiscal second quarter. Despite the earnings shortfall, the company raised its full-year guidance and reported solid sales growth across its retail business and Sam’s Club warehouse stores.

‍

As expected, tariffs played a significant role in Walmart’s quarterly performance. Last quarter, the company warned that U.S. consumers could face higher prices due to tariff-related cost pressures—a comment that sparked a sharp response from then-President Donald Trump. Following that, Treasury Secretary Scott Bessent noted that he had discussed the issue with Walmart CEO Doug McMillon, who said the company would absorb “some” of the impact.

‍

On Thursday’s conference call, McMillon reiterated Walmart’s commitment to minimizing price increases for shoppers.

‍

“With regard to our U.S. pricing strategy, we’re doing exactly what we said,” McMillon explained, according to a FactSet transcript. “We’re keeping prices as low as possible, for as long as possible, despite tariff-related cost pressures.”

‍

He added that while the tariff impact has been gradual so far, the effects could become more noticeable in the coming months.

‍

“As we restock inventory at post-tariff prices, our costs continue to rise each week—and we expect that trend to persist through the third and fourth quarters,” McMillon said.

‍

According to McMillon, Walmart is observing spending shifts primarily among middle- and lower-income households, especially in discretionary categories where prices have climbed.

‍

“We’re seeing customers switch to alternative items or, in some cases, to different categories altogether,” he said.

‍

To help customers manage higher costs, Walmart has rolled out roughly 7,400 price rollbacks—about 2,000 more than in the previous quarter.

‍

For the quarter ended July 31, Walmart’s adjusted earnings per share rose slightly to 68 cents, up from 67 cents a year earlier, but fell short of the 73-cent average analyst estimate compiled by FactSet. This marks the first earnings miss in 12 quarters, breaking a long streak of beats.

‍

Shares dropped 3.2% in premarket trading, making Walmart the biggest decliner in the S&P 500 Index ahead of the opening bell.

‍

Revenue, however, came in strong—rising 4.8% year-over-year to $177.4 billion, topping the FactSet consensus of $175.94 billion. U.S. sales grew 4.8% to $120.9 billion, driven by gains across key categories and income brackets, particularly among higher-income shoppers.

‍

Sam’s Club’s U.S. revenue increased 3.4% to $23.6 billion, while Walmart International sales advanced 5.5% to $31.2 billion, fueled by strong performances in China, Mexico (Walmex), and India’s Flipkart.

‍

U.S. comparable sales—covering stores open at least a year—rose 4.6%, beating expectations of 4.0% growth. Sam’s Club comps surged 5.9%, also topping forecasts of 5.2%.

‍

Jefferies analyst Corey Tarlowe praised Walmart’s momentum, noting that robust U.S. comps and share gains “underscore durable strength.”

‍

“While tariffs create short-term uncertainty, Walmart’s emphasis on value and market share positions it well for continued outperformance,” Tarlowe wrote.

‍

Walmart’s gross profit margin ticked up slightly to 24.5% from 24.4%. This is notable given previous warnings that tariffs could squeeze margins due to the retailer’s already thin pricing structure.

‍

For the full fiscal year, Walmart raised its guidance for adjusted EPS to $2.52–$2.62 from the prior range of $2.50–$2.60. It also lifted its net sales growth forecast to 3.75%–4.75%, up from 3%–4%.

‍

Earlier in the week, Home Depot announced that tariffs would cause some price increases, though not broadly. Meanwhile, rival Target reported stronger-than-expected second-quarter results on Wednesday, citing a meaningful boost in store traffic.

‍

Despite Thursday’s dip, Walmart shares remain up 13.5% year-to-date, outpacing the S&P 500’s 8.7% gain in 2025.

‍