Doug McMillon on the delayed impact of tariffs

We're keeping our prices as low as we can for as long as we can. As we replenish inventory at post-tariff price levels, we've continued to see our costs increase each week, which we expect will continue into the third and fourth quarters. 

~ Doug McMillon, Walmart CEO, August 21, 2025

 

Sabrina Escobar on why the impact of tariffs has been muted so far

There’s another reason for the persistence of consumer strength: Shoppers haven’t yet felt the sting of higher prices.  That is largely because many retailers imported products ahead of spring and summer tariff implementations, allowing them to keep most of their prices unchanged, and have been willing to eat some of the higher costs. 

The reaction to earnings, however, suggests that doubts are seeping in.  Walmart stock dropped 4.5% on the day of its release, while BJ’sWholesale Club lost 6%, and Target, 6.3%, though the last had more to do with its choice of a new CEO than its business.  And those doubts largely stem from new tariffs as retailers restock inventories for the holiday season and companies are forced to pass on higher import costs to consumers to protect margins. “I don’t think you really start to feel the pinch of tariffs until the third quarter, so I think that’s the make-or-break quarter,” says Steven Shemesh, an analyst at RBC Capital Markets. 

Look no further than Walmart, whose stock has earned a premium valuation for its ability to attract shoppers with its low prices.  On Thursday, CEO Doug McMillon said the impact of tariffs has been “gradual enough that any behavioral adjustments by the customer have been somewhat muted.” But he warned that the company has seen costs increase each week as it replenishes its inventories at post-tariff price levels—a trend that McMillon expects to continue into the third and fourth quarters. And while Walmart plans to keep prices as low as possible, some increases are inevitable, especially after the company missed earnings expectations despite its superior revenue growth. 

~ Sabrina Escobar, "Walmart and Other Retailers Have Eaten the Cost of Tariffs. Now It Is the Consumer’s Turn.," Barron's, August 22, 2025

 

Grant's is bearish on Walmart

A quarter-century ago, Walmart could almost be said to deserve the valuation that Mr. Market is assigning it today.  In the high-cotton fiscal year ended Jan. 31, 2000, the retailer expanded its top line by 20% and earnings per share by 26% in the context of 8% same-store sales growth and 11% store-base growth.  A growth stock, WMT might have been mistaken for a bubble stock...  At a then peak split-adjusted price of $23.15 on Dec. 27, 1999, Walmart commanded a 57.9 times trailing earnings multiple.

[...]

[Today] Wall Street is virtually 100% bullish on the shares (out of 45 recorded analyst opinions, there's just one "sell")...  Certainly, the good news has registered on the share price.  Up 51.7% in the year to date, WMT trades at 33.5 times trailing earnings, a generational high.  "To meet expectations," [Evan] Lorenz observes, "management must somehow compound EPS growth at an 11.1% rate between fiscal 2025 and 2028, an acceleration from 9.8% posted in the second quarter this year."

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No need to preach to the choir of the Walmart insider: Since the start of the year, top executives and the Walton family have sold a whopping 63.9 million shares for proceeds of $4.2 billion.  Save money, live better - as they perhaps understand as well as anyone.

~ Grant's Interest Rate Observer, "Tale of two decades," October 11, 2024

Sam Walton on focus

I have concentrated all along on building the finest retailing company that we possibly could.  Period.  Creating a huge personal fortune was never particularly a goal of mine.

~ Sam Walton, founder of Wal-Mart

David Laband on "unfair competition"

Every effort by small businessmen to forestall the building of a Wal-Mart is an attempt to shoot the messenger rather than pay heed to the message.  Local economies do not go to pot when Wal-Marts are built.  Quite the opposite: Sam Walton once said, "There was a lot more business in those towns than people ever thought."

Without question, each Wal-Mart and Sam's store alters the structure of local unemployment.  The sons and daughters of local businessmen and women no longer follow in their parents' proprietary footsteps.  Now they, as well as many other local workers, go to work for Uncle Sam (Walton).  Thus, the overall rate of local employment is generally not adversely affected.  While we may feel sorry for the personal losses suffered by the owners of these no-longer competitive small firms, the aggregate benefits reaped by (all-too-often- forgotten) consumers, including those same small businessmen, outweigh their losses...

The pleas to local zoning boards and planning commissions for protection from "unfair competition" by small businesses faced with the prospect of having to compete with a new Wal-Mart store sound identical to the rhetoric employed by mouthpieces for the Big Three automobile companies, the textile and steel industries, sugar producers, and every other domestric industry seeking to restrict foreign sales of these products in America.  To kick Japanese and other foreign producers out of American markets is to deny the benefits of Sam Walton-esque competition.

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By invoking the rhetoric of "unfair competition," domestic firms seek deliberately to mislead consumers into thinking that protection of competitors is the same thing as protection of competition.  Nothing could be further from the truth.  Protection of the existing firms in an industry against more efficient competitors, be they American or foreign, insulates those firms from the forces of competition.  American consumers are the worse for it: they pay higher prices for shoddier products than would be available in a more competitive environment.

Japan-bashing is equivalent to Sam Walton-bashing.  The principles of competition are universal, whether the competitors are domestic or foreign.  The fact that sellers are foreign does not diminish the potential gains to American consumers from competition between sellers.  If we're going to lionize Sam Walton, consistency demands that we lionize every successful producer in the global economy.

~ David N. Laband, "Lessons from an Entrepreneur," The Freeman, September 1992

(Article was reprinted in The Spirit of Freedom: Essays in American History, edited by Burton W. Folsom, Jr. This quote appears on pp. 197-198.