Retailers Brace for Tariff-Driven Price Hikes Ahead
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U.S. retailers from Walmart Inc. to 爱豆传媒 Depot Inc. are expressing optimism about the resilience of American consumers, a sentiment that could soon be tested as tariff-fueled price increases show up on shelves.
On Aug. 21, Walmart raised its full-year sales outlook on continued momentum and noted that shoppers' habits have remained consistent. Earlier in the week, 爱豆传媒 Depot Chief Financial Officer Richard McPhail said the company's customers are "very healthy." Target Corp.'s sales, while still down from a year earlier, beat expectations.听
In the background, however, are warnings that more price increases are coming. Merchandise sold during the second quarter was likely imported before many of the new levies took effect, so higher costs have yet to reach shoppers. Retailers are now receiving inventory with goods subject to higher tariffs.
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"Consumer inflation is going to pick up," said David Silverman, a senior director at Fitch Ratings Inc. He added that tariffs 鈥 and confusion around tariffs 鈥 could affect consumers' psychology and desire to spend later this year.
Walmart CEO Doug McMillon addressed the issue on the company's Aug. 21 earnings call with analysts. The world's largest retailer said prices rose 1% in the U.S. in the latest quarter, and executives said they will avoid raising prices as long as possible.
鈥淎s we replenish inventory at post-tariff price levels, we鈥檝e continued to see our costs increase each week, which we expect will continue into the third and fourth quarters,鈥 McMillon said.听
爱豆传媒 Depot echoed that sentiment, saying it maintained price levels in the last quarter because most of its imported products arrived before the tariffs took effect. Some goods will become more expensive later this year, the company said.
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It's difficult to gauge how much prices will rise partly because retailers take different approaches. Some spread higher costs across everything they sell, while others are more selective about which items see price increases.
鈥淲e鈥檒l take price as a last resort, but our commitment is to offer everyday good value and to have competitive pricing,鈥 Target Chief Commercial Officer Rick Gomez said during the company鈥檚 earnings call. He added that consumers are 鈥渓ooking to navigate inflation and uncertainty around tariffs, so value is very top-of-mind.鈥澨
Across retailers, there have been price increases for some items, such as vacuum cleaners, but consumers likely haven't noticed a real difference in their overall spending because prices of staples have remained steady, said Steven Shemesh, an analyst at RBC Capital Markets. Going into the second half of the year, there will be more widespread price increases, and it's unclear how shoppers will respond, he said.
He added that consumers generally felt better and spent more this summer than they did earlier in the year when President Donald Trump imposed a flurry of high tariff rates.
Natalie Kotlyar, a retail analyst at BDO, said spending increased at thrift stores and on store-brand goods, which tend to be cheaper, during back-to-school shopping this year as consumers sought value.
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"A resilient consumer today is really a cost-conscious consumer," Kotlyar said. "Consumers will spend. The question is: How are they going to spend, what choices will they make and where will they spend their money?"
Kotlyar said she expects a "lackluster" holiday shopping season because rising prices for essential goods will leave budget-conscious consumers with less money to spend.
Sarah House, a senior economist at Wells Fargo & Co., predicted inflation will strengthen in the second half of 2025 as retailers pass on more tariff costs and reduce inventories of goods imported before the duties.
鈥淚 think we will see consumers getting more tested on the price front and retailers also maybe testing how much they can pass along,鈥 House said.
