The financial impact of the Trump administration’s shifting tariff policy is reaching the shelves of America’s biggest retailers. Walmart, the largest of them all, warned this week that levy-driven price hikes will only become more common. “As we replenish inventory at post-tariff price levels, we’ve continued to see our costs increase each week,” Walmart CEO Doug McMillon said on the retailer’s second-quarter earnings call. He added that the trend will likely persist through the rest of 2025.
Walmart first flagged price increases back in May, cautioning it could not fully absorb the financial hit of tariffs—a warning drew President Donald Trump’s ire. Trump publicly demanded that Walmart “EAT THE TARIFFS.” Around one-third of Walmart’s merchandise is produced abroad, with heavy reliance on imports from China, Mexico, Vietnam and India.
Despite the pressures, Walmart topped revenue estimates with $177.4 billion sales for the May-July quarter, up 4.8 percent year-over-year. Net income, however, came in at $7 billion, missing Wall Street’s profit expectations. McMillon said customer behavior hasn’t shifted dramatically overall, but noted that middle- and lower-income shoppers are more likely to switch products or categories in response to rising prices compared with higher-income households.
Target, one of Walmart’s biggest rivals, has so far been more hesitant to raise prices. “What we’ve said, and it continues to be our position, is that we’ll take price as a last resort,” Target CFO Rick Gomez said during its Aug. 20 earnings call.
Still, Target acknowledged the pressure tariffs are creating. The company, which announced this week that CEO Brian Cornell will step down next year, projected a low single-digit sales decline in 2025. “Obviously, the straight cost impact of tariffs will be with us as long as the tariffs are with us,” Fiddelke told analysts. Target nevertheless beat estimates on both revenue and net income for the quarter.
Home Depot, meanwhile, has reversed course on its earlier pledge to avoid price hikes. In May, the company said it would instead get rid of some product options. But during its Aug. 19 earnings call, Home Depot’s executive vice president of merchandising, Billy Bastick, said that plan has changed. “There’ll be some modest price movement in some categories, but it won’t be broad-based,” he said, adding that Home Depot is also scaling back promotional activity in certain areas to offset tariff costs.
The broader economic environment is weighing on the company’s performance. Home Depot reported $45 billion in sales and $4.5 billion in net income for the quarter, falling short of Wall Street’s expectations for the first time since 2014.
Home Depot’s rival, Lowe’s, in contrast, impressed Wall Street this week. The home improvement chain reported $2.4 billion in net income on nearly $24 billion in revenue, which matched analyst expectations. CEO Marvin Ellison emphasized the company’s strategy of sourcing more goods domestically. About 60 percent of Lowe’s merchandise now comes from the U.S., while imports from China have dropped to 20 percent—down significantly from seven years ago.
Pricing remains a “dynamic” environment for the time being, said Ellison, who added that Lowe’s will fluctuate its prices depending on additional factors like competitive responses and internal algorithms. “We’re managing this literally in real time because this is uncharted waters,” he said.
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