Walmart prides itself on rock-bottom prices for everyday goods, but as soda, snack and toothpaste makers boost what they charge retailers in response to rising costs and looming tariffs, something’s got to give.
The question is where. Investors will get a sense of that give-and-take when Walmart reports results Thursday. Average prices for consumer goods rose 2.3 percent in the first six months of 2019, according to data tracker Nielsen, the fastest pace in several years. Walmart said it saw “modest” inflation in the first quarter, but it has heated up lately, and a Walmart shopping trip was 5.2 percent more expensive in June compared with a year earlier, according to Gordon Haskett Research Advisors. For thrifty Walmart shoppers, that matters.
Coca-Cola, PepsiCo, Procter & Gamble and Kellogg are among those jacking up prices, pressuring Walmart into a decision: The retailer can absorb the price hike and see its profit margins suffer, pass along the increase to shoppers and risk losing sales, or use its clout with suppliers to delay or mitigate the impact. Walmart won’t comment on its plans, but experts say the retailer will likely employ a blend of all three strategies.
“Walmart will do everything they can to not pass this on to consumers, but at some point they will have to because there is not enough cost savings to offset the inflation we’re starting to see,” Brian Yarbrough, an analyst at Edward Jones, said in an interview. “Still, they have a lot of leverage over suppliers, so I’m sure they’re pushing back.”
