Walmart (WMT) investors’ fear of looming tariffs and a conservative outlook are outweighing the company’s recent profit beat.
“We’re not immune to this [tariffs], but we typically will work with suppliers on this. We’ll shift supply where we need to. We can lean into our private brands. There’s a lot of tools that we have that to try to keep those prices low for customers,” CFO John David Rainey told Yahoo Finance.
Walmart touts that two-thirds of its annual product spend is made, grown, or assembled in the US, giving it lower exposure to imports than other companies. Beyond the US, it imports food from Canada and Mexico, whereas general merchandise is “more dependent on a country like China,” per Rainey.
Read more: What are tariffs, and how do they affect you?
The Trump administration recently levied an additional 10% tariff on all Chinese imports, while a 25% tariff on Mexico and Canada is currently on hold. The president has also put reciprocal tariffs on other countries on the table.
Rainey said the company has not raised prices yet but will likely pass along some increases to consumers if costs rise.
Walmart shares slumped more than 6% in trading on Thursday after it issued conservative 2026 fiscal year guidance. Rainey said it was a prudent approach, given the uncertainty surrounding tariffs and the macro environment. He told investors in its earnings call, it does not “have any explicit assumption in our guidance around tariffs.”
Tariffs could reverse the deflation within general merchandise. “Electronics, microwaves, some of those categories, a lot of those come from China, so there could be some impact there,” Rainey said.
This past quarter, the general merchandise category saw mid-single-digit deflation among items like headphones, TVs, sporting goods, and pet food. That, plus consumers returning to the category for the second quarter in a row, contributed to low-single-digit same-store sales growth.
But Walmart could have a leg up in a tariff-heavy environment. D.A. Davidson analyst Michael Baker said the retail giant, given its scale, can maintain margins should further tariffs go into effect.
“[It has an] ability to push back any increases to their suppliers and vendors and manufacturers,” Baker said over the phone. “If you’re a supplier, you want to do whatever you can to keep that Walmart business.”
Plus, rising inflation could push more pinched shoppers to Walmart. “[There will be] a trade down of more customers shopping at Walmart to try to save money,” Baker added.
