Walmart's Prices Are Likely to Rise. This Week, Target and Other Retailers Will Detail the Impact of the Tariffs

Retailers are once again in the spotlight as investors closely monitor how American consumers are responding to persistent economic uncertainty and trade-related price pressures. After Walmart Inc. delivered its quarterly earnings last week — earnings which one analyst labeled as the most crucial for gauging shopper sentiment this season — the company issued a warning: expect prices to rise in the near future.

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This week, investor attention shifts to other major retailers, with home-improvement giant Home Depot Inc. set to release its quarterly report on Tuesday, followed by Target Corp. on Wednesday. Lowe’s Cos. Inc., a key competitor to Home Depot, is also due to report during the week, as are several off-price retailers, including TJX Companies Inc., BJ’s Wholesale Club, and Ross Stores Inc. Urban Outfitters Inc. will also share its results.

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These upcoming reports are expected to offer greater insight into how consumers are reacting to continued trade turbulence and uncertainty. According to a new FactSet analysis of S&P 500 companies’ earnings calls over the last two months, corporate mentions of "tariffs" have surged to their highest levels in a decade. At the same time, the use of the word "uncertainty" is at its peak since the pandemic began in 2020, while references to "recession" have reached their highest since late 2022.

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Although the stock market has managed to bounce back after a dip in April — prompted by President Trump’s announcement of a potential tariff increase on global imports — consumers have displayed mixed reactions. A recent preliminary reading from the University of Michigan’s consumer sentiment index for May showed a continued decline, marking the fifth straight month of reduced optimism, with inflation concerns taking center stage.

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Despite these worries, Walmart reported that April, the final month of its fiscal first quarter, exceeded expectations in terms of performance. However, company executives warned that greater volatility in its financial results could lie ahead as U.S.–China trade negotiations continue. They signaled the possibility of larger fluctuations in the months to come, dependent on how those talks progress.

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Meanwhile, other retailers are also feeling the pressure. Boot Barn Holdings Inc., known for its Western-themed apparel and footwear, noted that sales have remained solid in recent weeks. Still, the company acknowledged that demand could weaken and profit margins could narrow as it begins to sell products affected by tariffs.

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David Wagner, a portfolio manager and equity analyst at Aptus Capital Advisors, remains cautiously optimistic about consumer resilience. “The consumer remains strong and the resiliency of corporate America to navigate this volatile and unknown time continues to amaze me,” he said in an email. However, he added that investor focus should extend beyond overall consumer health to include more discretionary, high-priced items — such as home appliances — which may face deeper scrutiny in the coming earnings reports.

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Retailers also face short-term questions about their current inventory levels and how much of their product stock may already be insulated from the effects of tariffs. In terms of pricing strategies, a recent analysis by UBS indicated that products at Target — such as packaged foods, health supplies, and office items — were priced roughly 11% higher than at Walmart, 14% higher than at Costco, and 19% above prices on Amazon.

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Because of its size and supplier relationships, Walmart has greater leverage to absorb the added cost of tariffs compared to competitors like Target. “Walmart will have more room to absorb tariffs relative to other retailers like Target,” Wagner said.

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He also predicted that while the short-term focus will remain on tariffs, Target may increasingly rely on aggressive promotions to maintain sales momentum — a strategy that could eat into its profit margins over time. Target’s business model leans more heavily on discretionary products — such as home décor and apparel — rather than essential goods like groceries. As cost-of-living pressures continue, more consumers are scaling back on non-essential spending.

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Target’s latest annual report emphasized that a “significant portion” of its inventory is sourced internationally, with China being its top country for imports. Home Depot, like many large retailers, has been working to diversify its sourcing to lessen its exposure to any one country or region, especially amid ongoing trade tensions.

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As the week progresses, a total of 18 S&P 500 companies, including one member of the Dow Jones Industrial Average, are slated to release their earnings, according to FactSet. The results will offer more clarity on how corporate America — and the average American consumer — are managing the challenges posed by trade disruptions, inflation worries, and shifting spending habits.

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