How Much Will Tariffs Hurt Walmart's Profits?

Retail

Published: September 21, 2018 6:30 am

Last Updated: January 11, 2020 5:33 pm

Walmart Inc. (NYSE: WMT) management has warned that tariffs will hit a number of goods it sells in the United States. The world’s largest retailer imports much of its inventory from China. Prolonged tariffs could undermine Walmart’s financial results, and along with that its share price. This year’s holidays, so critical to retailer profits, may be rough for Walmart.

Over the past six months, Walmart shares are higher by about 9%, which is roughly the same as the S&P 500. Much of this is based on its strong results in the most recent quarter. Overall revenue rose 3.8% to $128 billion, compared to the same period a year ago. U.S. results were even more impressive. They rose 5.2% to $82.8 million.

While Walmart relies on much of its revenue from its International and Sam’s Club divisions, strong results from its U.S. division are essential to its success. Some Walmart sales rely very little on imports. This is particularly true of its large grocery business.

According to a study by The Alliance for American Manufacturing and published in 2016:

In America, estimates say that Chinese suppliers make up 70-80 percent of Walmart’s merchandise, leaving less than 20 percent for American-made products. … If Walmart continues to grow at the same rate, in 2023 the company will spend just 3.2 percent on American-made goods.

A 10% to 15% increase in the prices of articles it imports from China could wipe out much of Walmart’s bottom line.

For American retailers, Walmart is just the tip of the iceberg. Thousands of retailers must be in a similar position because of their reliance on goods made in China.

Retailers make all their profits during the last quarter of every year. A rise in costs of imports during this critical period would have a brutal effect on many of them. That could be exactly what will happen this year.

24/7 Wall St.
Did Amazon Just Target All Dollar-Store Shoppers?

Are You Still Paying With a Debit Card?

The average American spends $17,274 on debit cards a year, and it’s a HUGE mistake. First, debit cards don’t have the same fraud protections as credit cards. Once your money is gone, it’s gone. But more importantly you can actually get something back from this spending every time you swipe.

Issuers are handing out wild bonuses right now. With some you can earn up to 5% back on every purchase. That’s like getting a 5% discount on everything you buy!

Our top pick is kind of hard to imagine. Not only does it pay up to 5% back, it also includes a $200 cash back reward in the first six months, a 0% intro APR, and…. $0 annual fee. It’s quite literally free money for any one that uses a card regularly. Click here to learn more!

Flywheel Publishing has partnered with CardRatings to provide coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.