President Trump tells Walmart to 'eat' higher costs brought on by his trade approach as terms like 'tariffs,' 'uncertainty' and 'recession' are coming up more frequently in company earnings calls
Following Walmart Inc.'s earnings last week - which one analyst said would be the most important quarterly results for shopper sentiment so far - executives suggested consumers prepare for price increases, potentially within a few months.
This week, the lens on the consumer will narrow, as we get quarterly reports from retailers like home-improvement chain Home Depot Inc. on Tuesday and Target Corp. on Wednesday.
Home Depot (HD) archrival Lowe's Cos. (LOW) also reports during the week. So do off-price chains TJX Companies Inc., which operates T.J. Maxx, Marshalls and HomeGoods; BJ's Wholesale Club Holdings Inc. (BJ); and Ross Stores Inc. (ROST). Also reporting results is Urban Outfitters Inc. (URBN).
Those quarterly financial results will land as analysts look for more detail on whether and how much consumers have balked as shifting trade tensions and negotiations keep the economy in limbo. Mentions of tariffs on corporate earnings calls are at a decade high, according to a new FactSet analysis of S&P 500 companies over the past two months. Similarly, mentions of "uncertainty" are at their highest level since 2020, when the pandemic hit. Mentions of "recession" are at their highest level since the end of 2022.
Markets have rebounded from the blow they took after President Donald Trump early in April said he would hike tariffs on imports from much of the world, but then temporarily paused the harshest escalations. Consumers, on the other hand, have offered mixed signals.
For instance, a University of Michigan gauge of U.S. consumer sentiment slipped in a preliminary May reading. That marked its fifth consecutive monthly decline, amid worries about steepening retail-price increases.
Still, Walmart (WMT) said that its results in April, the last month of its first quarter, were better than it expected. But management said the company could see "larger swings" in its financials up ahead, as the U.S. and China negotiate their differences on trade.
Trump reacted harshly over the weekend to widely reported commentary from Walmart's CEO that prices at the big-box chain would invariably be headed higher as a result of the tariffs on goods imported to the U.S. Instead of passing on costs stemming from the elevated levies, Trump posted on his social-media platform, Walmart, with China, should "EAT THE TARIFFS."
Dating back to his successful 2024 election campaign against first then-President Joe Biden and later then-Vice President Kamala Harris, Trump had insisted that American consumers would feel no negative impact from his tariff scheme, claiming instead that funds generated as goods were imported would flow directly from foreign companies and countries to the U.S. Treasury.
In his post on Truth Social, Trump, addressing Walmart, indicated he and customers would be watching Walmart's price tags.
Among other retailers, Western-wear chain Boot Barn Holdings Inc. (BOOT) said it saw strong sales trends over the past several weeks. But it said that demand could wane and that its margins could suffer as it starts to sell tariffed products.
David Wagner, portfolio manager and equity analyst at Aptus Capital Advisors, said that the U.S. consumer was still holding up overall.
"The consumer remains strong and the resiliency of corporate America to navigate this volatile and unknown time continues to amaze me," he said over email.
Still, he said, along with the broader health of the consumer, spending on big-ticket items - examples of which might be things like appliances - could be an area of deeper focus for this week's retail results.
In the near term, there also will be questions about how much product retailers already have on hand that won't be affected by tariffs. As for competition on prices, UBS analysts recently said that prices for packaged goods, health products and office supplies sold at Target were around 11% higher than similar items at Walmart, 14% more than at Costco Wholesale Corp. (COST) and 19% more than at Amazon.com Inc. (AMZN).
"Walmart will have more room to absorb tariffs relative to other retailers like Target," Wagner said. Walmart's size and leverage with suppliers are advantages, he noted.
Wagner later added: "While the focus will be on tariffs in the near-term, I'd expect Target to rely on heavy promotional activities to drive sales longer-term, which will likely be at the expense of margins."
Target relies more on discretionary items for sales versus such essential purchases as groceries. Cost-of-living increases have forced more consumers to focus on covering the basics.
The chain, in its most recent annual report, noted that a "significant portion" of its merchandise comes from outside the U.S., either directly or indirectly, with China serving as its biggest source.
Home Depot (HD), among other retailers, has tried to source more of its products from more places.
Eighteen S&P 500 companies, including one Dow 30 member, will report quarterly results this week, according to FactSet.
The calls to put on your calendar
Footwear demand: Lower demand, higher apprehension about the economy, tougher competition and consolidation have come to define the shoe industry over recent months. Results this week from VF Corp. (VFC), which makes Vans sneakers and Timberland boots, and Uggs and Hoka parent Deckers Outdoor Corp. (DECK) may seek to assuage investors, as trade frictions remain top-of-mind and Nike Inc. (NKE) retrenches to focus more on athletes.
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