Walmart is getting hit by tariffs, like every other business in America. But customers are still flocking to Walmart because they believe the retailer offers them the biggest bang for their buck.
The retail behemoth once again on Thursday showed how it uses its size to dominate the industry. Its economies of scale help keep prices as low as possible, even as Trump’s tariffs raise costs. Walmart also relies on its strength in groceries and necessities to win over shoppers looking for discounts. More than half of Walmart’s sales come from groceries.
Walmart said Thursday that sales at US stores open for at least a year jumped 4.8%, and it gained market share across income groups, led by growth with upper-income households. The company also raised its sales outlook for the year.
CEO Doug McMillon said that tariffs have created pressures for the company and its seeing its “costs increase each week.” But it’s keeping prices down “for as long as we can.”
Customers have not made major shifts to their purchasing behavior because of tariffs, he said, but some middle and lower-income households have stopped buying some discretionary products that have gone up in prices.
“Value is still en vogue. That’s the key message from Walmart,” Neil Saunders, an analyst at GlobalData Retail, said in a note to clients. “Broad consumer and macro trends remain favorable to Walmart.”
Still, Walmart’s stock fell 3% during pre-market trading. The company missed analysts’ profit forecasts. Heading into Thursday, Walmart’s stock had increased 36%.
Walmart is surging ahead of its rivals, such as Target and Home Depot. Target, in particular, is in a funk and its CEO is stepping down.
Target on Wednesday reported sales fell for the third consecutive quarter. Shares tumbled 6%. Target has been one of the worst-performing stocks on the S&P 500.
Target CEO Brian Cornell is stepping down after 11 years at the retailer, as the company faces slumping sales and backlash to its retreat on DEI. He will be replaced early next year by Michael Fiddelke, Target’s current chief operating officer. Some investors and analysts criticized the move, arguing Target should have hired an outside voice to lead the company.
The company’s business is falling behind Walmart because it stocks more non-essential goods such as home decor than Walmart. Many shoppers, strained by inflation over the past several years, are buying fewer discretionary products and focusing on essentials.
Target also imports about half of its merchandise, compared to roughly 33% at Walmart, so it needs to raise prices at almost double the rate of Walmart to mitigate the tariff impact, Bank of America analyst Robert Ohmes said in a report this week.
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