Wal-Mart’s Q1 Success Threatened by Tariffs

Wal-Mart is a big box retailer that is adapting its operational strategy to the demands of the modern, digital, retail landscape. They should be lauded for not falling behind like many others who have succumbed to the retail apocalypse. Around since 1969, Wal-Mart celebrated 50 years in business this year with the best first quarter in nine years.

Focusing on the customer pays off

This success is tied back to its determination to tailor its shopping experience to its customer by increasing Omnichannel efforts. CEO and President Doug McMillion explained to Sourcing Journal Online. “We’re continuing our transformation to become more of a digital enterprise. At every step along this journey, we’re staying focused on the customer, and they are noticing.” Aside from digital, sustainability efforts and initiatives such as reducing carbon footprint, are speaking to the new wave of conscious consumerism.

It turns out, the customers did, in fact, notice. They noticed to the tune of an extra $80.3 billion, a further 3.3 percent increase. Moreover, home, fashion, and groceries grew the e-commerce segment by 37 percent. Overall, net income rose from $2.13 billion to $3.64 billion in a year.

Avoiding the threat of tariff increases

Although these numbers are evidence of healthy profit margins, Wal-Mart is not invincible-at least to tariffs. Despite this, Brett Biggs, executive vice president, and CFO shared the companies optimism to Sourcing Journal Online. He shared,

“We’re monitoring the tariff discussions and are hopeful that an agreement can be reached. Our goal is to always be the low-price leader, and we will actively manage pricing and margins as warranted with our customers and shareholders in mind. Our merchant teams have been focused on this for months and continue to execute appropriate mitigation strategies.”

Wal-Mart may have to raise its prices if the trade war continues. At the same time, it is in an advantageous position within the market. This position allows them to work with vendors to create new strategies to keep prices low. One of these is “accelerated buying.” This quarter Wal-Mart’s inventory grew 5.9 percent in an attempt to stockpile more goods in preparation for future tariffs. Also, they’ve used this excess to fulfill next-day deliveries for online orders. So it looks like these measures have furthered increased Wal-Mart’s net income and hopefully keeping prices down for as long as possible.

Author:  Christine Duff

Christine wants to live in a world filled with cutting edge fashion, beautiful words and and an endless supply of leather jackets and boots. A product development grad of FIDM, she was the Editor-in-Chief of MODE Magazine where she reignited her love of storytelling. She has diverse experience within the industry with trend research, art direction and styling editorial spreads. She gained her most notable experience working in Los Angeles at the satellite operation for GQ and Vogue Thailand. Christine is passionate about social science and the role it plays in the consumer goods industry and apparel in particular.

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