By coinnews 
00:00 Speaker A
Walmart delivering solid sales and earnings growth in the latest quarter, but warning on its call that tariff pressures could mean higher prices soon, as early as next month. I’m joined now by John David Rainey, Walmart CFO alongside Yahoo Finances Executive Editor Brian Sozzi. Brian, take it away for us.
00:13 Brian Sozzi
Uh thanks so much Madison. John David, always nice to see you here. So lots of headlines this morning on uh Walmart’s call out of having to raise prices to offset these tariffs.
00:26 Brian Sozzi
I know you don’t take this decision lightly. Um can you talk to us, you know, you’re thinking behind it, and then how much on average will prices go up at Walmart?
00:35 John David Rainey
Well it’s good to speak with you Brian and good to be on the show. You know very well we’re wired to keep prices as low as we can for our customers. Everyday low prices is what we stand for, and we’re going to keep prices as low as we can, as long as we can. But when you look at the magnitude of some of the the cost increases on certain categories of items that are imported, uh it’s more than what retailers can bear, it’s more than what suppliers can bear. And so we’ll work hard to try to keep prices low, but it’s it’s unavoidable that you’re going to see some prices go up on certain items. And so we’ll work to try to keep that as low as we can, and and certainly look to try to gain share and be aggressive and play offense in this environment uh to keep prices lower than others. But uh given that you’ve got 30% tariffs on certain categories of items that are going to be imported, you’re likely going to see some price increases go up there.
01:26 Brian Sozzi
Uh John David, so when I work walk into a Walmart store in a few weeks, where what department where I see some of the, I guess the highest price increases? And you know, secondarily, you know, we see tariffs, we’ve been talking about tariffs all year. I hear tariffs are 145% in China, and your first thought is, well, prices are going to go up 145% in furniture. I know that’s not how it works. But like, what would uh uh in a current environment, what would it cost to buy some new furniture in Walmart today compared to this time last year?
02:07 John David Rainey
Yeah, so a couple categories that stand out, Brian, would be electronics, toys, those are one where we’re more dependent upon imports and certainly China. But vacuum cleaners is another example, baby strollers, car seats. And some of these items when when you’re buying a car seat or a baby stroller, that’s not really a discretionary item, that’s a necessity, which is why we’ve been so emphatic that prices are still too high. Um but when you when you look across the basket of goods, I’m certainly there’s going to be some areas where you see prices uh go up on these items.
02:46 Brian Sozzi
Like double digits?
02:50 John David Rainey
Uh well if you’ve got a 30% tariff on something, um you’re likely going to see double digits. But it’s also it’s why it’s so important for retailers to really understand the elasticity of demand around this. Because if you were to go back as you as the example you gave with 145% tariff, if you’re selling patio furniture at $2,000 and you apply 145% tariff to that, I’m pretty sure you’re not going to sell a lot of patio furniture units. So you know, that that’s where a company like Walmart is probably going to absorb a lot of that price increase to try to still be able to sell units, but it makes it challenging for retailers to absorb all of that, given the magnitude of some of these price increases that that have gone up. I I will say one more thing Brian. Um we’re very appreciative of the progress that’s been made by the administration to try to lower tariffs from what were originally proposed in early April. But we still think they’re too high, and we’re still hopeful that further progress can be made and prices can come down to something lower than where they are today.
03:53 Speaker A
And John, great to speak with you. To that end, analysts keep telling me that lower tariff rates make pass-through costs to consumers more likely. How did your thinking on pricing changes shift off the back of this 90-day truce with China? Are you more likely to pass on the 30% tariffs than you were at 145%?
04:14 John David Rainey
It really depends upon category. Um you know, if you think about bananas is something that we import all of our bananas from uh Latin America and the price per pound has gone from 50 cents to 54 cents. We can absorb a lot of that. It’s one of our highest selling items. But as the previous example with uh patio furniture, it gives you a different dynamic and you you really have to understand the elasticity of demand around all these items. But again, we are wired to keep prices as low as we can for our customers. And so we’re going to try our very best to do that for as long as we can.
04:54 Speaker A
And when you think about these price increases, do you think you might disperse them across the board to items that maybe aren’t as negatively impacted by tariffs and import costs to lessen the impact of price increases that you may have to do because of tariffs on something like technology. How are you thinking about dispersing the price hikes?
05:15 John David Rainey
Practically speaking, that’s what all retailers will have to do. If you go back to what was proposed in early April, that’s more money than likely the entire retail industry made last year. It can’t be fully absorbed by retailers. It also can’t be absorbed by suppliers. And so you’ll see merchandisers um um work to to mix the merchandise in the categories to try to absorb this in a way that is least impactful to customers.
05:46 Brian Sozzi
John David, I I um you know, I normally wouldn’t be asking you about Federal Reserve policy, and I’m not, but we do have a speech out this morning from Federal Reserve Chief uh Jerome Powell saying this in DC, and I think it applies to Walmart. Said quote, “We may be entering a period of more frequent and potentially more persistent supply shocks.” You’re the world’s largest retailer, do you agree with what Jerome Powell said here, and that’s what uh is coming to us in the future?
06:16 John David Rainey
Well, I haven’t read all of his comments yet, but certainly we want to be very mindful of uh supply chain shocks. We don’t want to get back into a situation like we were into the 2022 time frame. So one of the things, Brian, that we’re monitoring really closely is the flow of containers, the flow of inventory through ports. As we sit here today, it’s flowing just fine, but that could change as you think about retailers trying to optimize their pricing, whether it be maybe parking uh inventory on a container ship off the port waiting for lower tariff rates, or we’re doing something different that may disrupt that flow. So it’s very important to keep an eye on that. As we sit here today, inventory is still flowing though.
07:00 Brian Sozzi
All right, fair enough. And then, you know, we came off the first quarter, uh GDP in this country fell three tenths of a percent. From the vantage point of your business, are we at that same rate for the second quarter? Does it feel like, you know what, this economy is not growing, and and it’s not where it needs to be?
07:22 John David Rainey
I can only tell you what we see with our customers. And our customers have continued to be discerning, choiceful, uh maybe a little bit more concerned than they were a year ago at this point in time because there is an awareness around the impact of tariffs. And so as you look through the the three months of the first quarter for us, February was not that great. We were impacted by unseasonably cool weather uh that impacted store traffic, but we also detected a little bit of negative consumer sentiment, and that changed some shopping patterns. March felt um more on plan. It was more of what we expected. And April was actually really strong. We had a strong Easter seasonal period. As we’ve come into the first couple weeks of May, May feels a lot like April. So there’s nothing that we can see looking in the rearview mirror that would indicate that there’s a difference or an inconsistency in consumer behavior. But I I think that’s only half the picture. You’ve really got to look forward because a lot of the price increases that we’ve talked about with tariffs have not taken effect yet. We’ll begin to see some of this as we get into the back half of May, and then also in a more pronounced fashion in June. And so I don’t I don’t know that we can uh look at the first quarter and use that as an indicator of what the second quarter is going to look like.
08:38 Speaker A
Yeah, that makes a lot of sense, but I am curious more specifically about any potential shortages that you may be able to predict at this time. Gene Seroka of the Port of LA telling me that consumers can no longer take full shelves for granted in the United States. Any products that you’re worried about shortages on?
08:55 John David Rainey
We’re not canceling orders related to the tariffs. I think any retailer in the normal course of business is going to make some changes and cancellations here and there, and and that’s true for us as well. But it’s not as if we’ve sent out an edict that says cancel orders. Now, what we have done is on certain of the the certain items that are higher price, we may have adjusted quantities to um match the expected demand. But it’s very important to us that we have our merchandise and goods on the shelves for our customers because we want to be there for them in these times when value matters more than ever.
09:28 Speaker A
And I know you mentioned there is an interest from Walmart to have these tariffs lower. Have you talked to the White House recently about that?
09:37 John David Rainey
Fortunately, we we have had um a dialogue with uh the administration, and we’re very um um thankful to have that opportunity to be able to share our perspective on what’s happening with the customer and what could happen with the customer. Um and and look, we’re we’re um very encouraged by the progress that’s been been made that tariffs have come down from the the prior level, but we’re hopeful that further progress progress will continue to be made and they’ll come down even even more.
10:07 Speaker A
Walmart’s John David Rainey and our own Brian Sozzi. Thank you both so much. I really appreciate your time.