Trump tells Walmart to “eat tariffs” instead of raising prices
President Donald Trump said Saturday that Walmart should “eat tariffs” rather than condemn the obligations imposed by his managers on imports due to increased retailers’ prices.
Reuters
Target cut its annual sales forecast on Wednesday after a surprising sharp decline in the same quarterly store sales as customers pulled back discretionary purchases due to inflation and continuing economic concerns from President Donald Trump’s trade war.
Target also said its first quarter performance was affected by a negative response to pullbacks to January’s Diversity, Equity and Inclusive Policy (DEI), angering loyal customers who have long praised the company’s commitment to inclusiveness.
The company’s shares continued to weaken, falling 4% in afternoon trading. In the past 12 months, the stock has lost 40% of its value, while Costco’s stock has won 30%, and Walmart’s stock has doubled.
Target struggles with product failure, retail crime and inventory management. Over the past year, it has maintained stable sales growth, dealing with boycotts and litigation related to DEI practices, and relying heavily on sourcing from countries where Donald Trump has placed widespread tariffs.
“Target’s (results) do nothing to restore confidence in the company. On the contrary, they represent businesses that have made too many mistakes and have lost their way in some ways,” said Neil Sanders, managing director of Global Data.
According to LSEG, Target said Wednesday it expects a single-digit decline in annual sales. Target previously forecast net sales growth of around 1%.
The results of the Big-Box Retailer show that American consumers are under pressure. In May, consumer sentiment fell even further during a surge in inflation forecasts for the year. Still, the target’s forecast contrasts with its bigger rival Walmart, which maintained its annual forecast last week but said it would need to take over higher prices due to tariffs. It sparked the rage of President Donald Trump, who said Walmart should “eat tariffs” on imports.
In the media call, target executives refused to provide details about potential price increases due to tariffs. They said most tariff-related increases could be offset, but they acknowledged that increasing prices could be a “last resort.”
CEO Brian Cornell said the pricing decision will rely heavily on continuing efforts to source more products in the US and reduce their reliance on China.
The company’s chief commercial officer, Rick Gomez, said Target is working to expand negotiations with suppliers, procurement to other Asian countries beyond China, reassessing its product assortment and adjusting the timing and volume of orders.
In January, Target ended many of the DEI policies, sparking serious criticism, and noting that focusing on inclusion would help attract young and diverse consumers. The decision attracted more attention as it coincided with President Trump’s executive order to eliminate DEI policies in federal agencies and schools.
The backlash has led to an economic boycott, especially from Rev. Jamal Harrison Bryant, the Rev. Georgia, who organized a 40-day “fast” Target Store earlier this year. He calls for those efforts to continue and opens a new tab in recognition of the fifth anniversary of George Floyd’s murder at Target’s headquarters, Minneapolis.
CEO Cornell said some DEI policy reversals played a role in first quarter performance, but it failed to quantify its impact.
China and imports
Target’s first quarter equivalent sales fell 3.8% compared to analysts’ estimates of a 1.08% decline. On a adjusted basis, Target reported $1.30 per share. Analysts were expecting an average of $1.61 per share.
“Target’s first quarter expectations were very low, and yet, Target’s results were clear,” Davidson analyst Michael Baker said.
Unlike Walmart, which generates the majority of revenue selling grocery items such as bananas, milk, toilet paper and shampoo, the majority of what Target sells is in non-critical categories, including equipment from China, primarily apparel, furniture and beauty products.
Target says it relies on 30% of store label goods and is on track to reduce it to less than 25% by the end of the year. This is down from 60% in 2017, but it is becoming more difficult to navigate China’s current 30% tariffs, analysts said.
Previous forecasts for annual adjusted revenues of $8.80 to $9.80 are expected to earn between $7.00 and $9.00 per share.
Reported by Siddharth Kavare of New York and Ananya Mariam Rajesh of Bengaluru, edited by Nick Zieminsky
