With the S&P 500 index up another 9.6 percent year-to-date, American investors have been able to mostly ignore the trade dispute between the U.S. and China up to this point. However, Walmart Inc (NYSE: WMT) now says it may be forced to raise prices due to the tariffs, a decision that could potentially derail Walmart’s strong start to the second half of the year.
Just days after President Donald Trump announced new tariffs on $200 billion of Chinese goods, Walmart sent a letter to U.S. Trade Representative Robert Lighthizer urging a de-escalation of the trade war and warning that import tariffs have broad consequences for U.S. businesses.
“As the largest retailer in the United States and a major buyer of U.S. manufactured goods, we are very concerned about the impacts these tariffs would have on our business, our customers, our suppliers and the U.S. economy as a whole,” Walmart says in the letter.
Walmart says American companies that rely on imported goods are now in a lose-lose situation.
“Either consumers will pay more, suppliers will receive less, retail margins will be lower, or consumers will buy fewer products or forego purchases altogether,” Walmart says.
The news comes as Walmart and its investors gear up for the critical holiday season. Prior to the potential disruption from trade war tariffs, Walmart’s business had been booming in 2018. In the second quarter, the company reported 4.5 percent growth in same-store sales and a 40 percent increase in online sales.
According to Bank of America analyst Robert Ohmes, Walmart and competitor Target Corp. (TGT) were also performing well in the third quarter prior to the latest tariffs.
“The latest data for the month of August suggests both companies have seen a sequential acceleration in total and same-stores sales growth quarter-to-date trends,” Ohmes says.
Bank of America’s latest card spending data suggests Walmart is tracking for third-quarter revenue growth of around 4 percent, same-store sales growth of around 3 percent and e-commerce sales growth of around 45 percent.
For now, at least, Ohmes is not overly concerned about the long-term impact of the trade war. Bank of America has a “buy” rating and $115 price target for WMT stock.
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