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Walmart's (WMT) pricing power is under the spotlight as earnings from major retailers loom.
SW Retail Advisors president Stacey Widlitz joins Morning Brief to explain how Walmart's scale allows it to pressure vendors in ways other retailers can't.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
Stacy, great to have you this morning. Thank you for joining us. I think the key question ahead of earnings from the likes of Home Depot and Target later this week is what does Walmart signaling an increase in prices mean for those other retailers? Does it give them a free pass this week?
Well, I think we know that that prices are going up across the board. And, you know, that is tough for companies. And for Walmart, of course, they are the biggest and they have the most power to push back on vendors and share that cost to not pass it all of it onto the consumer. That's what we saw back years ago when we had tariff increases, and I think that's what we'll see again. So they offer the same the the best value in the market. Um, but I think, you know, you've you've heard from companies across the board that that we we will see prices go up absolutely, and the consumer is still being very choiceful, and that will eat into discretionary, no doubt.
And we're also hearing from the president. He talked about over the weekend on X the idea that Walmart should just eat into their own profit margins to stop these price increases from hitting consumers. Walk us through that. And this is something that obviously as investors, we know really well, you never want a company to eat into their profit margins, but just talk to me about that potential move forward for Walmart. If they did cut into their own profit margins to cover the cost of tariffs, what would that mean for them?
Well, I don't think that's going to happen. It's a nice idea, but Walmart is not going to take a hit on its operating margin that it's worked so hard to get where it is. And also, by the way, their e-commerce is now profitable. So I think that's unlikely. I think what is more likely again is that they're going to be able to press vendors increasingly to say, do better, do better, and the vendors are actually the ones who are going to be more under pressure than Walmart. And yes, of course, they'll pass a little forward. Um, other retailers don't have that same kind of power to push back. So I think Walmart's going to be one of your top performers this year.
