Yesterday, Walmart shared that U.S. sales increased 5 percent in the third quarter to nearly $115 billion, "easily surpassing analysts' estimates," The New York Times reported. "In-store volumes grew, pickup from store grew faster, and delivery from store grew even faster than that," Walmart’s chief executive Doug McMillon said in a statement.
Thanks to the upward trend, the retailer predicts a strong holiday shopping season and forecasts that its full-year net profit will increase between 4.8 and 5.1 percent, up from the previous forecast of 3.75 and 4.75 percent. However, come the new year, shoppers may not be quite as inclined to shop at Walmart, as CFO John David Rainey cautioned that prices are likely to increase.
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In an interview with CNBC, Rainey acknowledged that President-elect Donald Trump's proposed tariffs on imports from China could affect Walmart's normally affordable prices.
"We never want to raise prices," he said. "Our model is everyday low prices. But there probably will be cases where prices will go up for consumers."
Though it's still unclear how Trump's plans will pan out, what he's proposing will be much more sweeping than the tariffs he implemented during his first term. And economists seem to agree that consumers will feel the brunt of it.
As The New York Times explains, the previous tariffs affected Chinese imports such as aluminum and steel, not "final products." Omair Sharif, founder of data company Inflation Insights, noted that, "These are not things you go out and buy at Home Depot on the weekend."
By comparison, the new tariffs Trump is proposing could drive up prices on items such as clothing and shoes.
However, there is some positive news, which is that "two-thirds of the items that Walmart sells are made, grown or assembled in the U.S., which reduces the tariff risk for those goods," as CNBC reported. And the retailer hopes to increase this number.
"We’ve been living under a tariff environment for seven years, so we’re pretty familiar with that," Rainey shared. "Tariffs, though, are inflationary for customers, so we want to work with suppliers and with our own private-brand assortment to try to bring down prices."
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Walmart's successful grocery business could further protect it from tariff-related price hikes, as many of its food items are domestically sourced.
Grocery sales are being partially fueled by households earning more than $100,000 a year. This demographic, which historically has shopped via Amazon, accounted for 75 percent of Walmart's third-quarter gains, CNN reported.
"As we grow our [online] assortment, we’re able to appeal to more people and appeal to higher income levels,” McMillon said on an earnings call Tuesday, per CNN. "Those that have more discretionary income and want to save time are liking what we’re doing with both pickup and delivery."
To that end, Walmart’s online sales grew 22 percent in the third quarter.
For now, though, the retail sector and American consumers can only anxiously await what the new administration will bring.
