President Donald Trump’s changing trade policy causes headache for the largest American retailer.
While Walmart’s financial director John David Rainey praised the recent reduction in prices, he said that the company was not yet out of the woods.
“Let me emphasize, we still think it’s too high,” he said about the latest rates when Walmart’s winning call on Thursday.
Walmart says that it is important about a third of what it sells in the United States in other countries, namely China, Mexico, Canada, Vietnam and India, and that cargo is currently flowing.
“There are certain articles, certain categories of goods, that we depend on the importation of other countries, and the prices of these things will probably increase, and it is not good for consumers,” said Rainey.
Rainey also said that buyers showed signs of financial pressure, as evidenced by their expenses which move away from general goods and more towards food and the essentials.
CEO Doug McMillon added that it does not expect buyers will tolerate additional price increases on their grocery bills, which would limit the ability of the retailer to transfer import costs to other goods in its assortment.
“The first thing that comes to mind is food inflation,” he said. “We have gone through several years here where prices have increased in food, and our customers have felt it, and they no longer want food inflation.”
He also said that he hoped that any long-term policy would tackle food that the United States does not produce in significant quantities, such as bananas.
An additional wrinkle for the management of Walmart is the question of what economists call “the elasticity of prices” or the change of purchasing models in response to cost changes.
American consumers have proven to be surprisingly resilient in the recent years of high inflation and have continued to spend even if prices are climbing.
But Rainey said that prices make “more difficult to anticipate the request by the article”, because it is not clear how buyers will react to the new price increases related to prices and that retailers are wary of stuck by holding large amounts of expensive goods.
“We will see where our price gaps are,” said McMillon, “but we will also see what customers tell us and the answer we get the pressure they feel.”
Although this puzzle is a little more resolble with articles in turn like food, it is considerably more difficult to predict for seasonal sales events like the start of the school year or the holidays – and Walmart must place these orders now.
And thanks to a retail bizarre, a significant fluctuation in the prices of the shelves could have a disproportionate impact of the company’s financial results in the next quarters if it must provide significant adjustments to its stock evaluation.
“How to make a quantity call and which price number do you use?” McMillon asked.
businessinsider
